Bank of America: "We've Seen This Movie Before: It Ends With A Recession"

"We've seen this movie before and it typically ends with a flat or inverted yield curve. Based on history (and gravity), we think the most likely path forward is that the 2y10y spread reaches zero or inverts sometime over the next year or so and that recession of some kind follows in 2020 or 2021."

UBS Unveils Its Top 5 Themes And 19 Trades For 2018

UBS today released its top 5 themes and 19 trades for 2018. Not surprising from the bank whose 2018 base case is S&P 2,900, the bank is optimistic and notes that the Kool-Aid party will continue unless "underlying macro shifts reveal fragilities in asset valuations." Well, yeah...

Morgan Stanley Expects A "Completely Flat" Yield Curve In 10 Months

"As the Fed hikes in December and then three more times in 2018, 2yr rates rise while 10yr and 30yr rates fall as bond investors grow worried about the effects of Fed tightening and skeptical that they'll be able to deliver more of it. By 3Q18, we forecast a flat 2s10s Treasury curve and a significant rally in 30yr rates."

A Little-Known Indicator Sees VIX Soaring To 30

Morgan Stanley shows an interesting relationship between equity volatility and the economic cycle. It shows that the 2s10s yield curve tends to lead the VIX by 2 ½ years. This correlation suggests that the VIX should triple in the near future, and is the reason why the bank has just gone long the VIX.

"When To Worry?": How Long After The Curve Inverts Does The Recession Begin

Sometimes inversion provides a timely signal for the economic cycle a la 2000, where Professor Curve predicted almost the ding-dong high in the SPX. However the 2006 episode of inversion dished up 7 months of pain for equity bears, with 18% further upside for the SPX. Same for 1989 where equities continued to rally 22% into the 1990 recession...

Asian Stocks Smash Records; Dollar Slides As Crude Surges To July 2015 Highs

Global shares hit another record high on Wednesday, propelled higher by what increasingly more call (ir)rational exuberance, and investors’ unflagging enthusiasm for tech stocks, even as the yield curve continued to flatten. Meanwhile, oil jumped to 2.5 year highs pressuring yields as the dollar slid to a one month low.

Yield Curve Carnage Continues

Forget inversions, the last four times the US yield curve was at these levels, the US economy was already in recession...

Strong Foreign Demand Pushes Yield Lower In Stopping Through 10Y Auction

After yesterday's mediocre 3Y auction, moments ago the US Treasury sold $23 billion in 10 year paper in a very well received auction. The high yield of 2.314% was fractionally lower than October's 2.346%, and stopped through the When Issued 2.316% by 0.2bps. 94.01% of the bids at the high yield were accepted. This was the first 10Y refunding to stop through since August 2016.