U.S. YIELD CURVE FLATTENS
The US yield curve is undeniably marching toward inversion. We’ve got a huge borrowing requirement, totaling annual US Treasury issuance of some $1 trillion this fiscal year, up from $500 billion last year thanks to widening deficits, tax cuts and infrastructure spending. That’s a whopping 100% increase, at time when the US Treasury is withdrawing from the markets (moving from QE to QT) and foreign countries sour over US over tariffs, trade and more. On the short end, a hawkish Fed seems determined to continue to raise short rates this year, which takes the short end of the yield curve up. As the short end of the yield curve rises and the long end falls, the curve eventually inverts as it has in every recession since 1970. When that spread gets to zero and below, trouble looms. Yield curves matter when it comes to growth.