The Macro Report | April 2019
The yield curve's blurred lines
The global economy is showing a few tentative signs of improvement, but risks remain. Manufacturing is on a downtrend worldwide, but the services sector remains relatively resilient. In the United States, warning signs are flashing. Parts of the U.S. Treasury yield curve inverted as the yield on the 10-year note dipped below the yield of the 3-month bill. However, demand dynamics are playing a role. In March, the Federal Reserve signaled no rate hikes in 2019 and downgraded its growth outlook. Despite the warning signals, we believe the probability of a recession remains low.
Meanwhile, Europe continues to face headwinds of weaker demand for its exports from China and elsewhere, and political problems closer to home. Germany, the region's largest economy, has been flirting with recession in recent months. In addition, the British parliament remains deadlocked over the way to leave the European Union. While granted a reprieve for now, a disorderly "no deal" Brexit may be enough to tip the scales and send some of the region's economies into recession.
Yield curve inversion — trouble ahead?
The Treasury yield curve inversion has many on Wall Street predicting the economy will tumble into a recession.
Europe at a crossroad
Europe's biggest economies, including Germany, face significant headwinds, and a no-deal Brexit may tip the scales on growth.
About the macro report
The Macro Report is written by members of Putnam’s Fixed Income team. With backgrounds in applied economics, currency and interest-rate analysis, and sovereign and local bond market dynamics, this group conducts macroeconomic research in support of Putnam’s global fixed-income strategies.
Michael Atkin, Portfolio Manager
Investing since 1988
Sovereign debt, global growth analysis
Albert Chan, CFA, Portfolio Manager
Interest-rate derivatives, government debt, risk analysis
Onsel Emre, PhD, Analyst
Inflation, risk analysis, global growth dynamics
Sterling Horne, Analyst
Politics and economics
Irina Solyanik, CFA, Analyst
Quantitive analysis, growth forecasting
Izzet Yildiz, PhD, Analyst
Labor market analysis, global growth dynamics