MAJOR RECESSION INDICATOR FLASHES RED

Written by on April 4, 2022

MAJOR RECESSION INDICATOR FLASHES RED

Shared By Peter Boykin – American Political Commentator / Citizen Journalist

 

CNBC reports that: U.S. 5-year and 30-year Treasury yields inverted for the first time since 2006, raising fears of a possible recession.

 

Back up: Treasury bonds are government-issued bonds that mature over a fixed period of time. The purchaser gains interest on the bond they purchase. The government sells these bonds so they can spend money they don’t have.

 

In plain English, an “inverted yield curve” is when long-term interest rates are lower than short-term interest rates for someone who wants to buy a treasury bond.

 

In a normal economic environment: if you buy a treasury bond, the longer you hold the bond, the more interest the bank is willing to pay you.

When the yield curve inverts: the bank is actually going to pay you more money on short-term bonds than long-term.

 

Why? There are two factors:

 

The banks have so much uncertainty over the future of our economic situation that handing out a high 10-year interest could hurt them.

Inflation is so out of control that short-term interest rates need to be raised to slow down borrowing.

 

What this means for you: The last time this happened was in 2006, shortly before the Global Financial Crisis.

 

[Source: CNBC, Steve Cortez/War Room, Waking Up Right]

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