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Yield curve signals biggest recession warning since 2007

  • The yield curve inversion is at its most extreme since just before the 2008 financial crisis, with the 10-year note yield, at 1.74% earlier today, 32 basis points lower than three-month bills.
  • The yield curve is widely watched due to its track record in predicting recessions when it inverts for a sustained period of time.
  • As China responds to President Trump's threat of more tariffs by letting the yuan fall and stopping imports of U.S. agricultural products, stocks fell and investors turned to the safer haven of government bonds.
  • In conjunction with the lower stock prices and higher bond prices, volatility resurged with the CBOE Volatility Index (or VIX), also dubbed the fear index, jumps 26%.
  • With the increased demand for U.S. Treasurys, bond prices rise, pushing yield down.
  • iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) rises 1.2%; ProShares UltraShort 20+ Year Treasury ETF (TBT -2.3%).
  • Yield curve ETFs: STPP, FLAT
  • VIX ETFs: VXX, UVXY, TVIX

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TLT--
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FLAT--
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