SINGAPORE (Apr 1): A sian markets slipped on fears of a looming recession following the inversion of the US yield curve on March 22, as 10-year yields fell below three-month rates for the first time since 2007. Market watchers say the inverted yield curve typically foreshadows a recession within the next six to 18 months.
“The probability of a recession or slowdown over the next 12 months is elevated, but probably overstated,” says Eugene Leow, a rates strategist at DBS Group Research. “We are leaning towards a slowdown rather than a recession in the US.”
But the way Leow sees it, the US Federal Reserve’s pivot towards guarding downside risks instead of trying to normalise policy further makes sense, as weak global growth remains the single largest challenge.