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The inversion of US Treasury yields has intensified, and concerns about global economic recession have resurfaced
forex8 months before
Summary：The U.S. Treasury market experienced its deepest yield inversion since 2000 this week, sparking global concerns about a return to recession. Although central banks around the world have temporarily slowed down their tightening pace, structural risks are accumulating in a high-interest rate environment.
June 19, 2025 — Washington/Frankfurt joint report brokerhive
The yield curve between the 10-year and 2-year U.S. Treasury bonds inverted to -87 basis points this week, the most severe inversion in nearly 25 years. This phenomenon has always been regarded as one of the precursors of economic recession, and has once again intensified the risk aversion sentiment in the global capital market.
Investors have lowered their expectations for the Federal Reserve to cut interest rates in 2025, while also turning their attention to the structural weakness of the global economy, especially the combined effects of factors such as shrinking European manufacturing and slowing Chinese exports.
"The market is not waiting to see if a recession will happen, but rather debating when it will come." - Lucas Brant, head of global bond strategy at JPMorgan Chase & Co.
A quick look at global market dynamics:
| index | Changes of the week |
|---|---|
| US 10Y Treasury bond yield | 4.08% (down) |
| US 2Y Treasury yield | 4.95% (unchanged) |
| Eurozone Manufacturing PMI | 47.1 (sixth consecutive month of contraction) |
| Nikkei 225 Index | Down 1.2% |
| Gold Spot | Rising to $2047/oz |
| Bitcoin Price | Drop to $59,200 (increased volatility) |
Multinational policy responses:
The European Central Bank kept interest rates unchanged and warned that there would still be a dual risk of "high inflation and low growth" in the second half of the year
The Reserve Bank of Australia released the possibility of a rate cut, but stressed the need to observe the direction of the labor market
Bank of Canada concerned about risks from high household debt and falling real estate valuations
With long-term interest rates under pressure and short-term credit costs high, the global financial system is entering a new cycle of "high interest rates + low growth". For investors, risk assessment models may need to be fully updated to cope with possible credit shocks and liquidity difficulties in the future.
Written by: Derekcc , Global Macro Strategist
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