With Credit markets showing signs of distress about slowing growth with yields on US Treasuries slipping once again, the Global recession fears are looming large. The yields on 10-year US Treasuries have fallen to 2.34%, a 15-month low, according to Reuters. Treasuries were at 2.37% last week.
Although the developments in US-China trade war talks appeared to steady stock markets with China likely to make concessions on forced technology transfers in an attempt to get a deal over the line, this speculation around recession may de-stabilize the markets again. Negotiators are in Beijing as part of ongoing discussions about trade with hopes of a deal to prevent $250 billion of US tariffs on China and boost cooperation between the two sides continuing to be a thorny issue.
The yields in Australia and Japan are also at multi-year lows and have sparked concerns that recession could be just around the corner. Japan’s 10-year yields fell to the lowest since 2016 and Australian 10-year bond yields at record lows. Just a few months after rising bond yields frightened the markets, they’re now slipping to the lowest levels in years to underscore concerns about slowing global growth. The yields in Australia and New Zealand dropped to record lows, after a closely-watched part of the U.S. curve inverted on Friday as investors wager that a recession is coming.
Investors gave up on shares last week and fled to the safety of bonds while the Japanese yen hovered near a six-week high as risk assets fell out of favour on growing fears about a US recession, sending global yields plunging. US stocks futures fell, with E-minis for the S&P 500 skidding 0.5%. National Australia Bank's yield curve recession modelling is pointing to a 30-35% probability of a US recession occurring over the next 10-18 months.
Our analysts reckon that going by the stock market history, there has been a crash every 10-years and the last one took place in 2008. Although we have already experienced instability in the markets late last year but we cannot afford to be carefree thinking that the storm has passed. We advise our investors to be cautious and at the same time will keep them abreast of any such developments at the right time.
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