{"id":51340,"date":"2020-02-24T09:41:29","date_gmt":"2020-02-24T14:41:29","guid":{"rendered":"https:\/\/olduvai.ca\/?p=51340"},"modified":"2020-02-24T09:41:33","modified_gmt":"2020-02-24T14:41:33","slug":"recession-tipping-point-triggered-10y-yield-crashes-below-1-40-countdown-to-0-rates-begins","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=51340","title":{"rendered":"Recession “Tipping Point” Triggered: 10Y Yield Crashes Below 1.40%; Countdown To 0% Rates Begins"},"content":{"rendered":"\n

Recession “Tipping Point” Triggered: 10Y Yield Crashes Below 1.40%; Countdown To 0% Rates Begins<\/a><\/h3>\n\n\n\n

Last night, when the implied 10Y yield (Japan was closed) dropped to just 1 basis point above 1.40%, we said that we are literally this close from BofA’s “tipping point” <\/strong>for the 10Y Treasury, below which a recession is virtually assured according to the NY Fed’s recession probability indicator, and which also triggers a 12-18 month countdown to 0% rates.<\/p>\n\n\n\n

Well, this morning, with risk assets crashing, the yield on the 10Y has sliced below the 1.40% “tipping point” like a hot knife through butter…<\/p>\n\n\n\n

\"\"\/<\/figure>\n\n\n\n

<\/a>… and is now less than 1 basis point away from the all time low of 1.3579% hit on July 8, 2016.<\/p>\n\n\n\n

Why does 1.40% matter again?<\/p>\n\n\n\n

Because, as we explained yesterday<\/a>, breaking below this “tipping point” level requires more than 50% probability priced for the Fed cutting rates back to 0%! This means that breaking 1.4% in an on-hold context for the Fed creates a significant inversion of the curve, pushes recession signals higher, and pressures a further inversion of the FF1\/FF6 spread which we found in Pricing cuts ahead of the Fed to have no false positives for Fed cuts following a -30bp inversion <\/strong>(currently -16bp).<\/p>\n\n\n\n

What this means in practical terms from a duration perspective is that “the market may gap lower on a break below 1.4% for the 10Y Treasury”, as this corresponds to phase transition higher in recession probabilities and a clear challenge to the on-hold Fed stance, “particularly as convexity flows add to what would likely be a broader risk-off move. “<\/p><\/blockquote>\n\n\n\n

\u2026click on the above link to read the rest of the article\u2026<\/p>\n","protected":false},"excerpt":{"rendered":"

Recession “Tipping Point” Triggered: 10Y Yield Crashes Below 1.40%; Countdown To 0% Rates Begins Last night, when the implied 10Y yield (Japan was closed) dropped to just 1 basis point above 1.40%, we said that we are literally this close from BofA’s “tipping point” for the 10Y Treasury, below which a recession is virtually assured according […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[5010,2721,4318],"class_list":["post-51340","post","type-post","status-publish","format-standard","hentry","category-economics","tag-tipping-point","tag-us-treasuries","tag-zerohedge"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/51340","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=51340"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/51340\/revisions"}],"predecessor-version":[{"id":51341,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/51340\/revisions\/51341"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=51340"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=51340"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=51340"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}