The Globe and Mail reports in its Thursday, Aug. 8, edition that bond markets are sounding an alarm that the risk of a global recession is rising.
The Globe's Tim Shufelt writes that bond yields on government debt around the world are experiencing a swift descent. Negative interest rates are spreading throughout Europe and Japan, and the yield curve is inverted in both Canada and the United States. Manulife Investment economist Frances Donald says, "When the bond market sends a signal as strong as this, it would be wise to listen."
Gluskin, Sheff + Assoc. economist David Rosenberg says a similar inversion of yield-curve inversion has taken place in the United States, "to an extent that a recession now looks to be completely unavoidable."
A closely watched U.S. recession indicator, the premium on three-month Treasury bill rates over 10-year Treasury yields recently rose to its highest level since 2007.
Mr. Rosenberg says, "Tack on inverted curves in Germany and Japan, [and] we're talking global recession here." Mr. Shufelt says the proliferation of negative interest rates, meanwhile, points to a rising level of discomfort on the part of investors about the health of the global economy.
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