{"id":557,"date":"2020-08-28T13:21:17","date_gmt":"2020-08-28T19:21:17","guid":{"rendered":"http:\/\/gpswp.com\/ursadvisory\/?p=557"},"modified":"2020-10-02T15:49:15","modified_gmt":"2020-10-02T21:49:15","slug":"trouble-in-treasuries","status":"publish","type":"post","link":"https:\/\/gpswp.com\/ursadvisory\/trouble-in-treasuries\/","title":{"rendered":"Trouble in Treasuries?"},"content":{"rendered":"\n
After a decade of slow and steady growth, 2020 came in with a bang. Thus far, it has been a year of ballooning federal debt and deficit spending primarily monetized by the Fed in response to the COVID-19 crisis.<\/p>\n\n\n\n
This year, the Federal Reserve created new bank reserves in order to buy trillions of dollars worth of Treasury securities\u2014a practice commonly known as debt monetization. In fact, from mid-March through mid-April of this year, the Fed accumulated more Treasuries than the entire foreign sector accumulated over the past 6 years.<\/p>\n\n\n\n
Now, to set the stage, flashback to the March of 2019 when the yield on the 10-year U.S. Treasury dipped below the yield on the 3-month U.S. Treasury for the first time since 2007. Historically, the 10-year minus 3-month inversion has been the canary in the coalmine for an impending recession (Figure 1) with ample lead-time following an inversion.<\/p>\n\n\n\n