U.S. Treasury yields rose and remained inverted on Tuesday morning, amid concerns that recession may be on the horizon.
The yield on the 2-year Treasury note climbed 3 basis points to 2.461% at 3:30 a.m. ET, while the benchmark 10-year Treasury yield gained 2 basis points at 2.4413%. The yield on the 5-year U.S. government bond moved 3 basis points higher to 2.5924% and the 30-year Treasury yield added 2 basis points at 2.499%. Yields move inversely to prices and 1 basis point is equal to 0.01%.
5-year and 30-year Treasury yields inverted at the beginning of last week for the first time since 2006. 2-year and 10-year Treasury rates, which is the main part of the yield curve watched by investors, then flipped on Thursday for the first time since 2019.
Yield curve inversions have historically occurred prior to recessions, as investors signal their doubts about the near-term health of the economy by selling out of short-dated bonds in favor of longer-dated debt. There are concerns that the Federal Reserve’s aggressive hiking of interest rates, along with rising inflation, could weigh on economic growth.
Not everyone is convinced, however.
Longview Economics CEO Chris Watling told CNBC’s “Squawk Box Europe” on Tuesday that while the inversion of the yield curve is an indicator of an economic downturn, it is “one of many and it’s really the only one that’s signaling recession risk at the moment and it can be extremely early, up to two years early.”
Investors will be poring over the minutes from the previous Fed meeting, due out on Wednesday afternoon, for any clues to its plans for tightening monetary policy.
On Tuesday, Fed Governor Lael Brainard is due to speak about the variation in the experience of inflation in U.S. households, at the Federal Reserve Bank of Minneapolis Conference, at 10:05 a.m. ET.
February’s import and export data is set to be released at 8:30 a.m. ET. S&P Global’s final purchasing managers’ index readings for March are slated to come out at 9:45 a.m. ET, while ISM’s March non-manufacturing PMI is due to be released at 10 a.m. ET.
Meanwhile, Ukraine President Volodymyr Zelenskyy has pledged to pursue allegations of war crimes against Russian forces in occupied regions of the country. Zelenskyy on Tuesday is expected to address an emergency meeting of the United Nations Security Council.
There are no auctions scheduled to be held on Tuesday.
— CNBC’s Sam Meredith contributed to this market report.