What do you mean, the interest rate of US debt is upside down?

Recently, the yield of 10-year US bonds and the yield of 2-year US bonds are upside down, which has aroused market concern. From the past experience, the upside-down yield of 10-year and 2-year US bonds means the expectation of economic recession on the one hand, and the upside-down yield reflects the expectation of liquidity tightening and weakening fundamentals on the other hand. Today, I mainly talk about how the interest rate of US debt is upside down.

What do you mean, the interest rate of US debt is upside down?

Coupon rate remained unchanged after the issuance of US debt, but the transaction price of US debt fluctuated. For example, the transaction price of $65,438+0,000 bonds in the market may be higher than 65,438+0,000 or lower than 65,438+0,000. The transaction price determines the expected yield of US debt, which is inversely proportional, that is, the higher the transaction price, the lower the expected yield. In addition, the issuance period of US Treasury bonds is varied, ranging from 3 months to 30 years. The price and expected yield of American debt in different periods are different.

Under normal circumstances, the expected yield of long-term US bonds is higher than that of short-term US bonds, similar to bank time deposits. The longer the deposit period, the higher the expected rate of return. When the long-term expected rate of return is lower than the short-term expected rate of return, for example, the expected rate of return of 5-year US bonds is lower than that of 2-year US bonds, then the curve of the expected rate of return of national bonds will be partially upside down, which is often said.

In the past 30 years, the 2-year and 10-year interest rates of American debt have been reversed five times, which occurred in 1988, 1998, 2000, 2006 and 20 19 respectively. These five upside-down crises correspond to five famous crises, three of which occurred in the United States (1990 savings and loan crisis, 2000 science network bubble and 2008 financial crisis), 1 in Asia (1998 Asian financial crisis) and 1 in the world (.

The upside-down US debt is a good indicator of future economic difficulties, but the upside-down stock market may rise first and then fall. Because upside-down usually occurs at the end of economic expansion and the beginning of recession, economic expectations weaken but monetary policy expectations turn loose, so the short-term stock market may have positive returns. However, with the approach of economic recession, the molecular end of the equity market began to be under pressure, and negative interest rates began to be realized.