Stocks

Dow Futures Drop 92 Points as Bond Yields Slide

The 30-year Treasury yield dropped to 1.9137%—what would be a new all-time low—and has investors worried about the state of the economy.

The 30-year Treasury yield dropped to 1.9137%—what would be a new all-time low—and has investors worried about the state of the economy.

8:11 a.m. The Dow Jones Industrial Average looks set for a slightly lower open as the 30-year U.S. Treasury yield hit a new all-time low.

Dow futures have fallen 92 points, or 0.4%, while S&P 500 futures have declined 0.3%, and Nasdaq Composite futures have dropped 0.5%.

It’s a light news day—Prime Minister Boris Johnson asking the Queen of England to suspend U.K. Parliament is the highlight—but that hasn’t kept bond yields from falling. The 30-year Treasury yield dropped 0.0364 percentage point to 1.9137%, what would be a new all-time low, while the 10-year yield has fallen 0.0235 percentage point to 1.4475%. With the 2-year yielding 1.496%, that means the yield curve remains inverted. “In the bond market, the benchmark 10s-2s yield curve spread hit a fresh 12 year low below -5 basis points this morning while the 30-Year yield has hit a record low, signaling more broad market angst by the “smart market,” writes The Sevens Report’s Tom Essaye.

There’s been a lot of attention paid to the yield curve—maybe too much attention. Historically, an inverted curve has presaged a recession, but it is a lousy market timer. Sometimes a recession has come just a few months later, while in other instances it was well over 12. And with so much of the bond buying being driven by overseas investors looking for positive yield, it is hard to know if the yield curve even works anymore.

And it certainly hasn’t mattered for the market, despite the wild swings in August. The big drops started on July 31 and continued through Aug. 5. Since then, however, the S&P 500 has remained rangebound—and is still up 14% in 2019.

https://asset.barrons.com/dynamic-insets/charts/cdc_1db3e76cf23ff55ec1b8811a.json

Like the yield curve, the stock market is a leading indicator of the economy. And right now, it is definitely not freaking out. Whether it stays that way remains to be seen.

Write to Ben Levisohn at Ben.Levisohn@barrons.com

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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