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Yields dip: Is the inflation still relevant?

by Carl Steward
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Actual yields dipYields fall although inflation is still a concern

Although an actual yield dip curve inversion has historically been followed by a severe market correction or recession, we’re only looking at the stock market’s brief documented history here. It doesn’t follow that because it has happened three or four times before we now know what happened and that it will happen again.

We can’t predict whether it will occur in a few months or a few years because the time between the yield curve inversion and the recession has fluctuated in previous occurrences. That might be a very long time to wait for a recession and for a good opportunity to invest again in stocks.

After a choppy week, U.S. Treasury yields decreased on Friday as investors assessed whether an apparent slowdown in inflation gains could moderate the rate at which the Federal Reserve is raising interest rates. Some people have expressed optimism as a result of the data that the worst inflation spikes may have already passed. However, a lot of analysts and investors claim the importance of evidence. Before Fed policy changes.

Finally, the likelihood of a recession is guaranteed over a long enough time frame. Of course, we’re attempting to time it just a little bit. But that’s up to you to decide. With many traders away for the summer and some investors waiting to enter positions until there is more clarity on the outlook. Low liquidity has further increased market volatility.

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Bonds worth $15 trillion are on the world market with negative yields. Recently, the Actual yield dip on the whole stock of German government debt was negative. In the wake of the financial crisis, several rates on the US Treasury market fell into negative territory. There are now no Treasuries trading at negative yields, but I predict several wills in a year or so.

After reaching 2.902% on Thursday, the highest since July 22, the benchmark 10-year note yields decreased five basis points to 2.839%. The yield on two-year notes dropped six basis points to 3.174%. The yield curve between two- and ten-year notes, which is highly studied, was at minus 34 basis points and has since steepened after reaching the worst inversion since 2000 on Wednesday at minus 56 basis points.

Intuitively, it makes sense if we look at historical prices: gold has essentially no yield, so as US interest rates rise, the cost of storing gold increases relative to holding dollars. The higher the cost of having gold, the more people will sell it. This behavior is consistent with what we saw in the late 1990s. Back when interest rates were high. Gold fell from the 400s to the 200s, as well as in the early 2000s when gold began its ten-year run following the Fed’s rate-cutting measures.

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