Daniel Ivascyn: San Francisco and Market Participants

daniel ivascyn: An inversion of the 10-year/3-month measure of the curve has been highlighted by researchers at the San Francisco Fed as a highly reliable recession warning signal, typically preceding a downturn by more than a year, according to Market Watch. However, Ivascyn says investors have become overly anxious about recessionary signals despite evidence that the domestic economy remains solid. In an interview with Market Watch, Daniel Ivascyn, group chief investment officer of Pacific Investment Management Company, or Pimco, said too many market participants were watching for an economic downturn by monitoring the twists and turns of the yield curve, which saw the rate on 10-year Treasurys fall below the 3-month Treasury bill yield on March 22, marking the first such inversion since 2007. He said decelerating U.S. growth and lower terminal interest rates did point to falling yields, but he felt the recent rally was overstretched. He said a combination of technical factors including increased demand for longer-dated Treasurys because of a sharp uptick in mortgage refinancing applications may have amplified a recent bond-market rally, helping an inversion form even as the tight labor market and global growth outlook has yet to point to an imminent end to the U.S.'s second-longest expansion since World War II. Read The yield curve inverted here are 5 things investors need to know The catalyst for the yield-curve inversion were lost on market participants, with the S&P 500 index SPX, 0.00% falling nearly 2%, while the Dow Jones Industrial Average DJIA, -0.30% gave up 1.8% on March 22. Besides growth concerns, the investment manager instead sees other factors that have contributed to the phenomenon of long-term yields falling below their short-term counterparts. (news.financializer.com). As reported in the news.