- Home
- >
- Fundamental Analysis
- >
- Debt markets continue to signal a recession
Debt markets continue to signal a recession
Rating:
Loading...The yields on German government securities are already below zero for the first time since the financial crisis. Overall, globally, bonds are falling to fresh lows with almost every passing day. This sends a cacophony of signals that make investors feel pessimistic about the outlook for the global economy. Central banks from New Zealand to India have responded to this threat by surprising markets in trying to stimulate their economies.
In recent weeks, investors have seen lower yields on bonds everywhere. Squeezed to the wall, they are now desperately seeking sources of profit, avoiding risky assets in these times of uncertainty. Yields on absolutely all German government securities have fallen below zero this week, with the 10-year bonds of some of the most risky countries in the Eurozone - Spain and Portugal - approaching dangerously negative territory.
This causes market participants to hide in longer-term bonds, betting that the ECB will re-quantify to counter the weakening economy. We are already seeing less activity and a shift away from shorter-term debt instruments, bearing in mind that interest rates on deposits are -0.40%.
Globally, the effects of the trade war are being felt. 10-year US bonds are at their lowest levels since 2016, and 2-year bonds should not even be mentioned ... This is a clear sign that they may only divide us a few months until the next recession.
And undoubtedly, fears escalated this week that the US-China trade war could turn into a currency war. Earlier in the week, the PBOC devalued the yuan to its lowest since 2008. Traders are also increasingly worried that the Swiss National Bank may also interfere in foreign exchange markets, depreciating the Swiss franc. At that time, New Zealand and Thailand cut interest rates. Perhaps still unconscious, the Federal Reserve has also taken a course to ease monetary policy.
Source: Bloomberg Finance L.P.
Graphs: Used with permission of Bloomberg Finance L.P.
Trader Martin Nikolov Read more:
If you think, we can improve that section,
please comment. Your oppinion is imortant for us.
