Despite differences, U.S., German yield curves flash slowdown warnings

Parts of the U.S. Treasury yield curve have begun moving in opposing directions, but closer scrutiny shows each section is signaling the same warning that the era of expanding economic growth and interest rate hikes is nearing an end. Analysts say Europe’s yield curve is also signaling economic weakness even as it holds at much steeper levels than the United States, reinforcing the notion that risks of a slowdown on both sides of the Atlantic are growing. The Federal Reserve’s sudden pivot toward a dovish stance on future rate increases in March stunned the market and prompted a rapid repricing of Treasuries that in less than a week led to an inversion of the 3-month and 10-year Treasury curve. The inversion, where 3-month bills return at a higher rate than the longer-dated notes, is an anomaly that in the past has preceded economic downturns by around one to two years.