Financial markets are experiencing “The Crazy World of Libor, Swaps and Treasury Yield Curves.”
In other words, all three curves have a downward sloping section, all at different times, but all short-term (less than 6 year maturities).
What uncertainties are in financial markets and the unlying economies, you may ask? How about trade (e.g., US and China trade flows), Brexit, China’s recession, Japan’s ongoing stagnation (despite negative interest rates), Italy and Germany’s slipping into darkness, not to mention uncerainty about The Fed’s path for balance sheet unwind.
The Fed’s balance sheet is a particular concern since the 10-year Treasury Note yield began to rise when the unwind began, but rates have gone DOWN when the unwind got serious in 2018. Or is Fed Chair Jerome Powell really “The Iceman”?”
Here is a photo of Fed Chair Jerome Powell weiliding his “ice axe.”