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U.S. Three Month Treasury Yields Turn Negative, Recession Warning?

Interest-Rates / US Interest Rates Oct 02, 2015 - 12:29 PM GMT

By: Mike_Shedlock

Interest-Rates

Curve Watcher's Anonymous points out 3-month treasury yields dipped briefly negative on several days recently.

Yield on the 3-month bond was negative again today. Here is a table I put together with Treasury Yield Quotes from Bloomberg.


Treasury Yields vs. Month and Year Ago

One could also use US Department of Treasury Daily Treasury Yield Curve Rates to produce an end-of-day view as opposed to the intraday snapshop above and chart below.

Yield Curve vs. Month Ago and Year Ago

Long End Flattening

The time line is not to scale, but the above chart still tells the correct story. In particular, note a negative rate at the front end and the flattening at the long end of the curve vs. a month ago and a year ago.

Economy Strengthening?

Three month treasuries should not be negative in a rate hike environment.

Yields at the short end of the curve, from 6-months to 2-years are slightly higher than a year ago, an indication of anemic hikes. But if hikes are coming, rates should not be lower than a month ago.

The yield on 6-month treasuries actually declined 19 basis point in past month.

Are hikes really coming?

Recession Warning

None of this should be happening in a rising rate environment with an allegedly strengthening economy.

In fact, action at the long end of the curve coupled with negative yields at the very front end is outright recessionary behavior.

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2015 Mike Shedlock, All Rights Reserved.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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