Recession fears took hold on Wednesday as the short-term Treasurys paid more than long-term notes, a warning sign that investors are rapidly shifting their money into bonds to shield against the potential losses they could incur by holding stocks.
A brief inversion could be just an anomaly (others have not preceded recessions), but it may depend on how long the condition lasts.
Others say the inversion occurred because of the Federal Reserve, which has kept its benchmark short-term rate “too high,” while some maintain the yield curve has been distorted by more than $15T worth of foreign bonds that pay negative interest rates.
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