The bond market is signaling that the economy is in for a rough ride
The bond market is signaling that the economy is in for a rough ride. Bond yields are rising sharply, which means that investors are demanding higher returns to lend their money to the government and businesses.
This is a sign that investors are becoming more risk-averse, increasingly concerned about the risk of inflation and a recession, and that they believe that the economy is headed for a downturn. The bond market is a good predictor of recessions. In the past, an inverted yield curve, where short-term interest rates are higher than long-term interest rates, has preceded every recession.
The Federal Reserve's efforts to raise interest rates have started to impact liquidity in the financial system. While it's uncertain which domino will fall first, it's clear that commercial real estate, residential real estate, and the banking sector could be vulnerable.
Be careful when taking on new debt, as interest rates are rising.
Posted Oct 11, 2023, 9:49 PM UTC