Key part of yield curve ‘inverts’ as short-term rates jump after jobs report

Key part of yield curve ‘inverts’ as short-term rates jump after jobs report

5-year and 30-year U.S. Treasury yields inverted once again on Friday morning, stoking fears that a recession could be in the cards.

The yield on the 5-year Treasury surged 10 basis points to 2.522% at 7:00 a.m. ET, while the rate on the 30-year Treasury bond had jumped 7 basis points to 2.519%.

Meanwhile, the benchmark 10-year Treasury note was up nearly 9 basis points at 2.412%, and the rate on the 2-year U.S. government bond had moved 10 basis points higher to 2.389%.

Yields move inversely to prices and 1 basis point is equal to 0.01%.


5-year and 30-year yields inverted for the first time since 2006 on Monday.

The more closely watched 2-year and 10-year part of the yield curve then flipped after market close on Thursday. Some data providers showed the 2-10 spread technically inverted for a few seconds earlier Tuesday, but CNBC data did not confirm the inversion until Thursday.

Historically, yield curve inversions have occurred prior to to recessions, as investors selling out of short-dated Treasurys in favor of long-dated government bonds signals concerns about the health of the economy.

However, economists have pointed out that this indicator does not guarantee a recession, and that it can be more than a year after the yield curve inverts before there is an economic downturn.

In addition to rising inflation amid the Russia-Ukraine war, investors have become concerned that the Federal Reserve’s plans to potentially hike rates more aggressively to combat pricing pressures, could tip the economy into a recession.

Richard Koo, chief economist at Nomura Research Institute, told CNBC’s “Squawk Box Europe” on Friday that he believes the Fed would have to “run a little faster to make sure that inflation doesn’t go completely out of control, which is not particularly good news for the market going forward.”

March’s nonfarm payrolls report is due out at 8:30 a.m. ET on Friday and strong jobs data could give the Fed more confidence to keep its rate-hiking plan in place. Economists expect that about 490,000 jobs were added in March, according to the consensus estimate from Dow Jones, following a 678,000 payrolls addition in February. The unemployment rate is expected to fall to 3.7% from 3.8%, according to Dow Jones.

In addition, ISM’s March manufacturing purchasing managers’ index is due out at 10 a.m. ET on Friday.

Developments in the Russia-Ukraine war also remain in focus, with talks between the two countries having made little progress so far.

Russian President Vladimir Putin has said that foreign buyers of the country’s gas will have to pay for it in rubles from Friday.

There are no auctions scheduled to be held on Friday.

CNBC’s Patti Domm and Sarah Min contributed to this market report.

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