Yield Curve Collapse Signals 'Policy Error' Looms After Hawkish Fed Statement

Equity markets lurched lower but are coming back now after The Fed signaled a more hawkish expectation of two more rate-hikes in 2018. The dollar spiked and while Treasury yields also jumped, the yield curve collapsed to new cycle lows...

All major equity indices are red post-FOMC...

The dollar jumped to the day's highs...

Yield are up across the curve - 10Y still below 3.00%...

And while rates are higher the yield curve is getting crushed with 2s30s at its flattest since Oct 2007...flashing "policy error" panic.

And at the shorter-end 5s7s  are back into single-digits and 7s10s is only +3bps (almost inverted).

Guggenheim's Scott Minerd tweeted:

"The current shape of the U.S. yield curve is consistent with a recession in early 2020"

5s30s is among the most sensitive spreads...

One more rate hike and this is inverted!

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Gary Anderson 4 months ago Contributor's comment

Or it signals too much demand in the world for long bonds. Or maybe it is both. The most interesting indicator in the world right now.