Recession? In a first, Chinese yield curve fully inverts

Wednesday 14 June 2017

Credit stress is now very obvious in China. Interbank markets have all hit new yield highs in recent days:

Even more revealing, the Chinese yield curve has fully inverted for the first time in modern history:

An inverted yield curve is a classic recession indicator as short end tightening surpasses long term inflation expectations. We’ve seen similar if less comprehensive dips in recent years that did not result in recessions – in 2011 and 2013 – but what both did presage was material slowing ahead. At this stage we can say that is also baked-in dead ahead.

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.