- “The Global Bond Curve Just Inverted”: Why JPM Thinks A Market Crash May Be Imminent
by Tyler Durden, https://www.zerohedge.com/
At the beginning of April, JPMorgan’s Nikolaos Panigirtzoglou pointed out something unexpected: in a time when everyone was stressing out over the upcoming inversion in the Treasury yield curve, the JPM analyst showed that the forward curve for the 1-month US OIS rate, a proxy for the Fed policy rate, had already inverted after the two-year forward point. In other words, while cash instruments had yet to officially invert, the market had already priced this move in.
One way of visualizing this inversion was by charting the front end between the 2-year and 3-year forward points of the 1-month OIS. Here, as JPM showed two months ago, a curve inversion had arisen for the first time during the first week of January, but it only lasted for two days at the time and the curve re-steepened significantly in the beginning of April.
Fast forward to today when in a follow up note, Panigirtzoglou highlights that this inversion has gotten worse over the past week following Wednesday’s hawkish FOMC meeting. As shown in the chart below which updates the 1-month OIS rate, the difference between the 3-year and the 2-year forward points has worsened, falling to a new low for the year of -5bp.