The push for safer investment lifted US gold futures short of $ 1,500 per ounce on Wednesday for the first time in more than six years. US Treasury yields, which are moving at the opposite price, collapsed to levels unseen just before President Donald Trump's 2016 election.
Nervous central banks around the world are winding down interest rates in an attempt to blunt the pain of the customs battle. Central banks in India, New Zealand and Thailand all lowered interest rates on Wednesday – and all traded more emphatically than expected.
In summary, the trend suggests that investors and central bankers support economic and financial problems. It is less likely that the US and China will soon resolve the conflict.
"The longer customs security and escalation last, the greater the risk of something bad happening," said Keith Lerner, chief strategist for SunTrust Private Wealth.
Investors have poured in gold, and have been searching for safe places to put their money, which tends to do well in times of uncertainty.
strategy at Brown Brothers Harriman, told CNN Business. "But it certainly doesn't come from the inflation hedge angle."
Bond yields collapsed
Another sign of anxiety: A startling flow of money into bonds.
As demand for bonds grew, the 1
It's not just a US bond market phenomenon. Germany's 10-year bond yields plunged deep into negative territory, reaching a remarkable -0.6%. This means that investors who usually receive interest, instead pay German bondholders to park their money. Government debt in Switzerland and France also fell further into subzero territory.
"Returns are scary," Peter Boockvar, chief of investment at Bleakley Advisory Group, wrote in a note to the customers. "The already epic global bond bubble continues to inflate further."
Trump warns of yield curve
Warning signals flash in the yield curve, a reliable recession that measures the gap between short-term and long-term prices. During normal times, longer mature bonds pay higher returns than those with shorter durations. But these are not normal times.
The gap between the 3-month and 10-year returns is now the most reversed since 2007.
"And we all know what happened in 2008," Thin, the Brown Brothers analyst, wrote in a note to clients.
The good news is, according to Tynn, that the inversion of the yield curve was deeper and lasted longer before the Great Recession.
However, he also pointed out that the yield curve had improved before President Donald Trump unleashed a new customs round on China last week.
"American recession risk has actually increased," Tynn said.
Even Trump heard alarm from the fluctuations in the bond market.
"Yield curve is for too margin," Trump tweeted shortly before US markets opened.
The US president urged the Fed to cut interest rates "bigger and faster and stop their ridiculous quantitative tightening NOW," citing the central bank's shrinking balance.