QUOTES-Investors decipher inverted long end of U.S. yield curve

·1 min read

By Gertrude Chavez-Dreyfuss

NEW YORK, Oct 28 (Reuters) - The yield on the U.S. 20-year bond on Thursday rose slightly above the 30-year bond yield for the first time, according to traders, a move that garners attention because of investor sensitivity to inverted yield curves that can be a harbinger of recession.

At 1052 EDT (1452 GMT) the 20S/30S spread was -0.27 basis point, having ended Wednesday at 1.24 bp. The yield on the 20-year was last at 1.9700% and 30-year at 1.9693%.

SUBADRA RAJAPPA, HEAD OF U.S. RATES STRATEGY, SOCIETE GENERALE, NEW YORK

"It's really hard to read into the price action just from today. But broadly speaking, if there is a flight to quality or a rally, then in the back end (of the yield curve), the 30-year is going to be much more liquid than the 20-year. That's kind of the liquidity premium that's driving some of this inversion, if you will, between the 20-year and 30-year part of the curve."

DAN BELTON, FIXED INCOME STRATEGIST, BMO CAPITAL, CHICAGO

"I would not take the 20/30-year yield inversion as a recession signal. The move has a strong technical component given that it is entirely far out the yield curve. Further, no other benchmark rates have inverted."

"On the other hand, it does broadly reflect the flatter yield curve to which the market has been pricing. This is due to expectations for swifter Fed action to choke off inflation. The market has priced a steeper rate hike path which has cause the entire yield curve to flatten, although not invert." (Compiled by the Global Finance & Markets Breaking News team)

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