The United States pays more for financing after two years than after 10, 1.63% compared with 1.62%.
The total alarm signal has jumped. Investors closely watched the US sovereign yield curve and today their fears have finally come true. The United States pays more for financing after two years than after 10, 1.63% compared with 1.62%. Overtaking, which is interpreted as one of the most reliable indicators of this market regarding the onset of recession.
The US interest rate curve was reversed the last time in 2007, just before the global financial crisis erupted. Credit Suisse remembers that the previous four occasions also led to a decline in GDP, which triggered bearish moves in the markets.
But they still call for calm from the Swiss bank. Since the two- and ten-year investment in profitability takes place on the US debt curve, the S&P 500 needs an average of 18 months to start recording negative returns. In fact, and always according to the Credit Suisse analysis, one year after the investment, the US indices rise by an average of about 12%.
So far, the anomaly has accelerated losses on the stock market and the withdrawal of investors to assets traditionally considered a shelter. The market signal coincided with the publication of negative macroeconomic data in the euro area, with a slowdown in growth throughout the region, and Germany is already on the brink of recession. News about the bond market has strengthened the concerns of investors who have regained risk aversion in recent months.
But what exactly does the US reverse interest rate curve mean? Distortion, which means that investors are demanding more money for loans up to two years than up to 10, means they are discounting lower interest rates in the future. Central banks traditionally reduce the price of money in times of economic shock, so anticipating declines means they are discounting the arrival of a crisis that requires monetary intervention.
"The American economy is strong. Looking at the curve of the feet, information is thrown, but you need to watch out for alarms, because they can lead to self-fulfilling prophecies, "says the Spanish manager. For him, focusing on the details of each reference only serves to strengthen the fear of time, because the investment does not reflect real data, but the market expectations of a possible recession.