Home Share Market German yields invert to 30-year record

German yields invert to 30-year record


arsenisspyros

The inverted yield curve in the U.S. Treasuries market is not the only such pattern making headlines as investors worry about a potential recession on the horizon. The spread between the German 10-Year Bund yield and the German 2-Year Bund yield inverted to its widest level in 30 years.

During Wednesday’s trading, the spread between the DE 10Y and DE 2Y had dropped to -21 basis points, its steepest inversion spread since 1992.

As the yield curve inverted further, the German DAX was unable to make any real movements on the day. The index eventually closed near the flatline.

Looking at the impact in U.S. trading, popular German stocks such as SAP (NYSE:SAP), Deutsche Bank (NYSE:DB), and Siemens (OTCPK:SIEGY) have seen little movement. Moreover, the iShares MSCI Germany ETF (NYSEARCA:EWG) only experienced subtle changes.

Daily price action: SAP -0.1%, SIEGY +0.4%, DB +1.3%, and EWG +0.5%.

Inversion refers to a condition where shorter-term bond durations have higher yields than similar debt instruments with longer durations. History has shown that extended timeframes of inversion have acted as a predictor to future recessions.

The German yield curve initially inverted on Nov. 14. This is a relatively recent recessionary signal compared to the U.S. The yields between the U.S 10 Year Treasury yield (US10Y) and the U.S. 2 Year Treasury yield (US2Y) first inverted back on July 5 and now hovers near -76 basis points.

For the U.S., the inversion has reached the widest spread between the two instruments since 1982.



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