Thursday's Market Minute: Something To Do With Bonds

Yesterday, an actor friend of mine brought up the impending recession (his words), and loosely related it to “something to do with bonds”. I find it funny what financial news makes it outside of the usual bubble. It’s a good indication that someone has hit the panic button. The recent wild swings in the equity indexes as well as an inching higher VIX that topped a 24-level overnight seem to support that notion. There was lots of news for traders to digest yesterday, including “something to do with bonds.”

The 10-year treasury bond yield fell below the 2-year yield for the first time since 2007, suggesting investors have less confidence in the long-term economy. Historically, this type of yield curve inversion has preceded the last seven economic recessions. In addition, the 30-year bond yield hit all-time lows overnight. Markets are modestly up this morning, though still down on the week after yesterday’s sharp fall. All these together seem to show increasing skittishness among investors, although there’s still the popular “buy the dip” mentality that prevails during sell-off periods. Take cover and get out, or take advantage of opportunity: which side will be the one to take the fall?

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