Bond markets are flashing warning signs even as recession forecasts get dialed back, market vet Ed Yardeni says
The bond market is flashing a worrying signal that more pain may be in story for the economy, according to market veteran Ed Yardeni.
The Yardeni Research president pointed to signs of cooling inflation in the economy, which has caused more investors to dial back their expectations of a downturn. But there's still risk in the system, Yardeni said, thanks to troubles unfolding in the bond market. – a notorious indicator of a coming recession–can de-invert as financial conditions loosen. That typically happens when short-term yields fall back below longer-term bond yields, which tends to be bullish for stocks.
But long-term yields today are actually edging higher, with the 10-year Treasury pushing solidly back over 4% in recent weeks after trending down earlier in the summer, trading at 4.185% on Monday. In an atypical yield curve de-inversion, long-term rates rise and catch up with short-term interest rates, which are currently hovering around around 5%, Yardeni said.
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