#小非农增幅创3年多新低

Yesterday, the U.S. Treasury bond finally ended the longest inversion in history. From July 2022 to August 2024, it lasted a total of 783 days.

The direct reason is that the latest PMI and job vacancy data have been continuously below expectations.

Many people don't understand what the inverted yield curve is. Let me explain briefly. Under normal circumstances, the yield of long-term bonds is higher than that of short-term bonds. Because there are more uncertainties in long-term bonds, funds require higher risk compensation, that is, the yield curve will go up. But in the United States, this normal situation often reflects a counter-cyclical trend. The Fed began to raise interest rates because inflation was too high, and the market was worried about the risk of corporate short-term defaults, so it required higher risk compensation for short-term bonds. U.S. Treasury bonds also began to rise at this time, but in the interest rate hike cycle, the global dollar flowed back to the United States, and liquidity was super abundant. At this stage, the U.S. economy will tend to prosper.

The inverted curve becomes a positive hexagram, which means that the Fed is about to start cutting interest rates. Why cut interest rates? Because the economy has shown signs of recession, future expectations are highly uncertain, including interest rate cuts, higher unemployment, and declining consumption. Therefore, funds require higher risk compensation for long-term government bonds, so the inversion ends and the yield curve goes up again.

Does a rate cut necessarily mean a recession? The answer can only be found in history. After 1980, the Federal Reserve has carried out four relief-style rate cuts and five preventive rate cuts, and the US Treasury bond has obviously changed from an inverted to a positive one six times. Among them, the recessions from 1980 to 1981, 2000, and 2007 were relatively long, lasting from 1 to 1.5 years. 20 years is a special case and is not considered. Only the one in 1989 was relatively short, about half a year. In addition, there was a very short inversion in 1998, but the time was too short and had no reference value. From this we can conclude that a US interest rate cut does not necessarily mean a recession, but a recession will definitely occur after the end of the US Treasury bond inversion, but the difference is the degree and duration.

The future trend mainly depends on the degree of recession in the US economy. The market performance has obviously reflected the concerns of investors. How do you think the Fed will respond?