Fed to Blame for 'Crazy Inverted Yield Curve'


"The rates market rarely lies and globally it looks like it's expecting a day of reckoning", said Tom di Galoma, a managing director at Seaport Global Holdings in NY.

Central banks in India, Thailand, and New Zealand have recently and unexpectedly lowered rates after the newest tensions between the U.S. and China.

Worsening economic data, weak inflationary pressures, the escalating U.S.

USA president Donald Trump attacked the Federal Reserve again, while defending his trade war, as yields on USA 30-year bonds hit record lows.

Causing even more concern: The yield on the 2-year Treasury note briefly went above the yield on the 10-year Treasury note, the sort of "inversion" that, when it proves durable, has preceded prior USA recessions.

The inversion rattled investors already anxious that a U.S.

The president also insisted his trade war with Beijing is not the cause of the market turmoil. Major U.S. stock indexes were down about 2%.

The "yield curve" refers to how interest rates on Treasury bonds change with the maturity of those bonds.

While some market observers concede that the Fed should trim rates, Trump's chaotic and sometimes contradictory trade rhetoric has left many US businesses struggling to find clarity - a situation that will become all the more critical as the holiday season approaches.

That shifted in March, however, when the Fed abruptly brought an end to its hiking cycle. "But in times of insecurity, the inverted yield curve emerges to signal that investors" faith in the economy is wavering. I will explain this distinction and why it makes sense to focus most on the two-year/ten-year measure.

The ECB, meanwhile, is evaluating cutting rates further into negative territory and undertaking another bond purchase program. Some have even lowered rates to below 1%.

By easing financial conditions, a central bank can stimulate an economy by making business and consumer loans cheaper, while the depreciation of the local currency that results from lower interest rates can boost exports.

These results contributed to London's FTSE 100 closing more than one per cent lower on Wednesday, while markets in Germany and France finished the day more than two per cent down.

As of last fall, the Fed thought the economy, fueled by the Trump administration's massive $1.5 trillion tax cut package and spending plans, would grow strongly enough to justify steadily higher rates.

A chorus of other central banks including those in India, Thailand and the Philippines also cut rates during the week.

By December 15 all goods imported from China will face stiff United States tariffs, and markets are watching anxiously for signs of progress in the dispute.

This story has not been edited by Firstpost staff and is generated by auto-feed.