The short end of the treasury market seems fairly convinced that unemployment is about to rise, and interest rates will be cut dramatically. Since 2000, the 2 year yields have signalled recessions. But in 1990s the two year yield fell dramatically in 1994 and 1998, both years of emerging market crises but were failed recession signals as employment held up.
Its a little hard to find where the bearish view on employment is coming from. the KDP High Yield Daily has seen yields fall - which is normally economically bullish. I would see a spiking rate as a reason to get bullish treasuries - but here we have the opposite.
The leveraged loan market is also not really signalling trouble either.
The Government bond market is not giving me a recession signal either.
