unheard of for 22 years in the United States

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Such a situation had not been seen since the year 2000…




Photo credit © Reuters

(Boursier.com) — Such a situation had not been seen since the year 2000. The yield spread between two-year Treasury bills and 30-year US debt increased to a level not seen during of this century as the latest inflation data revived expectations of an aggressive Fed move next week.

The two-year rate rose another 3.9 basis points this morning, to 3.827%, while the 30-year rate rose by 4.1 bp to 3.499%. The spread between the two maturities thus reached levels last seen 22 years ago. “The curve is flattening more and the hard landing scenario is higher risk after the inflation data,” John Madziyire, portfolio manager at Vanguard, told ‘Bloomberg’. Treasury curve inversions are widely watched indicators since they are seen by many as a potential harbinger of recession.

U.S. consumer prices rose again in August, as higher rents and food prices overshadowed lower pump prices, and year-on-year inflation slowed less than expected, statistics show released Tuesday by the Labor Department. Money markets are now pricing in an 81% chance of a 75 basis point Fed rate hike and 19% of an even bigger 100 basis point hike on Sept. 21, according to the Real-Time Barometer FedWatch.


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