All signs point to an imminent recession. While it is unlikely to reach the levels we saw during the 2008 financial crisis, the average investor will still be hard hit.
It was quite a scary financial chart that spooked financial markets at the end of March – even more disconcerting than the usual charts depicting a retreating rand against the dollar or the slide in the property index on the JSE. The chart depicted the “inverted” yield of the three-month US Treasury compared to the benchmark ten-year, meaning that the yield in the three-month rose above that of the ten-year.
This phenomenon flies against all known money theory and financial knowledge about the market.
Yields on longer-dated treasuries are usually higher than short-term treasuries due to the inherent risk over the longer term, for which investors need to pay a higher yield premium. When the ten-year yield fell to 2.4% and the three-month rose to 2.5%, it meant that investors saw less risk over the longer term than over the short term. Therefore, negative short-term conditions necessitated selling for more safe-haven comfort over the longer term.
This is a very unusual and negative development.
A recession has always followed the selling of short-term bonds in favour of long-term investments in an inverted manner. The most recent being in 2006, before the Great Recession of 2008. It’s not simply a quirky happening. It is real, and based on economic realities where money is getting tighter due to interest rate increases already implemented. With inflation set to fall over the longer term, it justifies buying longer-term bonds at the expense of short-term instruments.
Diese Geschichte stammt aus der 18 April 2019-Ausgabe von Finweek English.
Starten Sie Ihre 7-tägige kostenlose Testversion von Magzter GOLD, um auf Tausende kuratierte Premium-Storys sowie über 8.000 Zeitschriften und Zeitungen zuzugreifen.
Bereits Abonnent ? Anmelden
Diese Geschichte stammt aus der 18 April 2019-Ausgabe von Finweek English.
Starten Sie Ihre 7-tägige kostenlose Testversion von Magzter GOLD, um auf Tausende kuratierte Premium-Storys sowie über 8.000 Zeitschriften und Zeitungen zuzugreifen.
Bereits Abonnent? Anmelden
THE HEALTH OF SA'S MEDICAL SCHEMES
As the Covid-19 pandemic abates, finweek takes a look at the financial performance of some of the largest players.
The effect of Gilbertson's departure
With Ntsimbintle Holdings now the major shareholder of Jupiter Mines, it could change SA’s manganese industry.
Making money from music
Why investors are increasingly drawn to the music industry.
Conviction is key
Sandy Rheeder plays a critical role in Mukuru’s mission to open up financial services to the emerging consumer market in Africa through tailor-made technology solutions and platforms.
The post-pandemic toolkit
How CFOs can use technology to support growth.
Big city living exodus
Mini cities like Waterfall City and Steyn City are redefining city-style apartment living.
Big compact, big value
Handsome, with a hefty level of standard specification, the roomy Haval Jolion compact crossover is a great value proposition.
On barriers to entry
There are various ways in which a company or sector can achieve competitive dominance. They usually make for good investments.
Fear and greed in one index
To buck the trend, when markets are hot or cold, is a tough thing to do. However, it can deliver solid returns.
Africa's largest data centre facility coming soon
Vantage Data Centers plans to invest over R15bn for its first African data centre facility in Attacq’s Waterfall City.