US 5-year and 30-year Treasury yields reversed on Monday for the first time since 2006, fueling fears of a possible recession.
The 5-year Treasury note yield rose 6 basis points to 2.6361% at 5:30 am ET, while the 30-year yield declined less than 1 basis point to 2.6004%. The 2-year yield rose almost 8 basis points to 2.3805% and the 10-year benchmark rose 1 basis point to 2.5066%.
This is the first time since 2006 that the shorter-dated 5-year Treasury yield has risen above the longer-dated 30-year US Treasury yield – just a few years before the global financial crisis.
However, the key yield spread traders are watching – the spread between the 2-year and 10-year rates – remained positive for now.
Historically, the yield curve has inverted ahead of recessions, with investors selling short-dated government bonds and buying longer-dated bonds, reflecting concerns about the health of the economy in the near term.
Rising inflation, exacerbated by the war between Russia and Ukraine, has heightened market jitters over the possibility of an economic slowdown.
Sunaina Sinha Haldea, global head of private capital advisory at Raymond James, told CNBC’s Squawk Box Europe on Monday that “investors should be concerned” about yield curve inversion and take note of positioning in their investment portfolios.
“Despite the momentum play in the stock market, you can’t avoid the fact that the soft landing looks a lot less likely than it did a month ago,” she said, alluding to the central bank’s efforts to tighten monetary policy to ease the Impact of Inflation.
The 10-year yield has jumped from 2.15% since early last week after Federal Reserve Chair Jerome Powell said the Federal Reserve could be more aggressive in raising interest rates to keep inflation under control.
Jobs data is an economic indicator used by the Fed to determine its monetary policy direction, so investors will be keeping an eye on the payrolls reports due this week.
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The February survey on vacancies and labor turnover is due to be released on Tuesday. This is followed by the release of the March ADP Employment Change Report on Wednesday, a weekly update on Jobless Claims on Thursday and the March Nonfarm Payrolls report on Friday.
In addition, the index of personal consumption expenditure for February, which is a measure of inflation, will be released on Thursday.
On Monday, February, retail and wholesale inventory data will be released at 8:30 am ET.
On Monday, $57 billion in 13-week bills, $48 billion in 26-week bills, $50 billion in 2-year bills, and $51 billion in 5-year bills are scheduled to trade be auctioned.