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Credit Markets NOT Signaling Recession Despite Downward Sloping Yield Curve

This is a syndicated repost courtesy of Confounded Interest. To view original, click here. Reposted with permission.

There is a lot of concern over an impending recession. The Treasury yield curve is signaling an impending recession, but the short-end of the curve is heavily manipulated by The Federal Reserve. In the past, a negative yield curve slope precedes recession by several months, and the 10Y-3M curve is now negative. Is a recession just around the corner?

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However, credit markets are not showing any impending crashes in volume. Real estate lending never recovered from The Great Recession primarily due to regulator oversight by the Consumer Financial Protection Bureau and increased bank capital requirements.

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If we look at non-agency mortgage delinquency rates, they are declining rapidly. Even as home price growth is slowing.

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If we look at Fannie Mae and Freddie Mac serious delinquencies, they are very low (but still higher than pre-2007 levels).

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So despite the impending recession hysteria (and a downward sloping yield curve), credit markets are not signaling recession.

Of course, recessions can occur like a white squall.

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Wall Street Examiner Disclosure:Lee Adler, The Wall Street Examiner reposts third party content with the permission of the publisher. I curate posts here on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. Some of the content includes the original publisher's promotional messages. I may receive promotional consideration on a contingent basis, when paid subscriptions result. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler, unless authored by me, under my byline. No endorsement of third party content is either expressed or implied by posting the content. Do your own due diligence when considering the offerings of information providers.

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