BMO Sees Risk Of Curve Inverting “As Early As March 2018”

Over the weekend, we published an analysis from Citigroup looking at how long after the yield curve inverts do investors “have to worry.” The results were interesting: as Citi wrote, while sometimes inversion provides a timely signal for the economic cycle a la 2000, “where Professor Curve predicted almost the ding-dong high in the SPX”, other times, like the 2006 inversion, dished up 7 months of pain for equity bears, with 18% further upside for the SPX. The same occurred for the 1989 episode where equities continued to rally 22% into the 1990 recession.

Whatever the timeframe between inversion and subsequent events, however, the curve first has to invert. So when will that happen. One bank provided a surprising answer earlier this week, when Morgan Stanley forecast a “completely flat” yield curve around the time of the FOMC’s September meeting.
Now, in its 2018 rates outlook, BMO’s Ian Lyngen and Aaron Kohli have unveiled a far more aggressive forecast, warning that there is a “risk of an inverted 2s/10s curve as early as the March meeting – if not, then by June.”
Here are the details, as excerpted from the report:

This post was published at Zero Hedge on Nov 30, 2017.

 

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