Our Recession Barometer recorded an extended “Inversion” of the yield curve ratio between the 10-Year and the 2-Year Government of Canada bond maturities on August 8, thereby putting Canada on “recession watch”. An Economic Recession historically has occurred between 15 and 20 months after an Inversion has occurred. This translates to a recession occurring in Canada between November 2020 and April 2021.
In the USA, our Recession Barometer is “stuck” at a reading of 9.5X, There has not been a sufficient number of Inversions of our key yield curve ratios to trigger our Count-Down to a possible U.S. Economic Recession. Last week, there were Inversions between the 10-Year and the 2-Year Treasury notes (our primary metric) on Monday, Tuesday, and Wednesday, but the yields were identical, or neutral at 0.00x , on Thursday and Friday.
We focus to a large extent on the 10/2 relationship but, of the 24 U.S. yield curve ratio maturities that we follow, 15 of them are inverted, as we show in a table. Strangely, in another table, the Overnight Banking Funding Rate is shown to be yielding a higher rate than any other maturity, even out to 30 years.
Our complete Recession Barometer report is available here: RB_083019
