US bonds continue to signal recession warning

Market professionals track the spread between longer-dated government bond yields and shorter-dated yields, with the former typically higher.

However, 2-year government bond yields rose three basis points to 2.998% on Wednesday, holding it above 10-year yields. That so-called inversion, especially if it persists, is often interpreted as a warning sign that the economy could weaken and that a recession could be ahead.

The 2-year to 10-year curve was first inverted on March 31, and then again briefly in June.

Treasury yields rose Thursday after rising in the previous session on the release of the latest minutes of the Federal Reserve meeting. The documents showed that the central bank was leaning towards another 75 basis point rate hike this month as it focuses on curbing inflation.

Market participants are increasingly concerned about the prospect of a recession as economic data has weakened, while the Federal Reserve has committed to aggressive monetary policy to tackle rising inflation.

On the data front, the first unemployment benefit claims for the week ending July 2 will be released at 8:30 a.m. ET, while U.S. trade deficit figures for May will be released at the same time.

The Treasury will auction $35 billion in 4-week notes and $30 billion in 8-week notes on Thursday.

— Elliot Smith of CNBC contributed to this report.

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