eResearch | That was quite a week for both the equity and the debt markets. At the end of the week, interest rates declined precipitously. However, yield curve ratios actually widened. That was probably an aberration.
Plunging Interest Rates
The chart below shows the trend in 10-year, 5-year, 2-year, and 3-month interest rates since July 1, 2019. Until the beginning of September, the trend for all was fairly stable. Not last week. What a plunge! No maturity was spared.
Key Metric: The 10-Year/2-Year Yield Curve Ratio
Same thing: a downward spiral.
Recession Watch
We use a combination of yield curve ratios to determine the likelihood of the USA going into an Economic Recession. Last week, the Combined Spread actually lessened, i.e., less possibility of the USA going into recession in the near term.
Last week, we said:
“Caveat: The coronavirus, known as Covid-19, if it turns into a global pandemic, will certainly impact global economies significantly, and most likely cause an Economic Recession in many countries of the world. It is unlikely that the United States would escape this scenario.”
There is no change in our opinion in that regard.
You can read our comprehensive report by clicking the following link: RecessionBarometer_March06-2020_US
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