Yield Curve Steepens, Corona Spreads, Finns Take Leave, Pundits Fear The Bern.

Demography Unplugged with Neil Howe

2:50: In this latest issue of my weekly podcast, I discuss how the yield-curve inversion has drastically steepened once again. By end of market yesterday, the 10Y closed at only 1 bp above its all-time low yield on July 5, 2016. Meanwhile, the 3M dropped to 1.53%. 10 days ago, the 10Y-3M inversion was thin, only 2 bp. At close of market yesterday, it had widened to 15 bp. The odds of another cut are now sharply rising. See "Power of the Spread, Revisited" for further yield-curve analysis.

12:35: Markets have woken up to the coronavirus. The official case and death numbers coming out of China ate still being greatly under-reported. Instead of 78,000 infected--which is the official total caseload to date--the actual number is closer to 1.5 to 3 million. It's probable that COVID-19 will eventually spread around the world. Over the weekend, we began to learn how the spreading virus will slow down economic activity. This could get much worse.

30:45: In Asia, few indicators are being released. The full economic impact of the coronavirus is still unknown. News did come out of Japan, which reported a -6.3% annualized decline in 4th quarter GDP. This bit of bad news was underway well before the coronavirus. At the same time, all of Japan's PMIs for Feb came in under 50. Almost certainly, Japan has now entered another recession.

31:45: U.S. economic news was mixed. Regional Fed manufacturing indexes were up. And another blast in building permits indicates that our housing sector is still booming. On the other hand, industrial production is still declining MoM. And, most seriously, the flash Markit PMI for services and composite in February surprised on the low side.

33:55: Finland passes one of the most generous family leave policies in the world. Prime Minister Sanna Marin led her all-female coalition of party leaders to give both parents 7 months of paid family leave after having a child. Finland is the most demographically challenged of Europe's Nordic nations.

35:15: Sanders surges into first place. He has won the popular vote in every primary thus far. Political sages are now shaking their heads saying that "socialist" can't possibly beat Trump. Yet, I'm not persuaded by the argument. Virtually all Americans have heard of Sanders by now and know that he calls himself a "socialist." And yet he is beating Trump in 9 out of 10 of the head-to-head polls monitored by RealClearPolitics. Trump won in 2016 by being the populist and anti-establishment wrecking ball. He'd better watch out. Unless he moves quickly in 2020, he may become the victim of that wrecking ball.
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