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Wall Street sinks as U.S. bond market stokes recessionary fears

August 07, 2019 / Medha Singh

U.S. stocks slipped on Wednesday, as investors reeling from rising trade tensions fled riskier assets for perceived safer havens, leading the bond market to price in a slide into recession. U.S. Treasury yields took another dramatic drop and the premium on three-month bill rates above 10-year note yields was at its most elevated levels since March 2007. This so-called inversion between the two maturities has preceded every U.S. recession in the past 50 years. The drop-in yields also reflected a jump in expectations that the Federal Reserve would cut key borrowing costs three more times by year-end, with markets fully pricing in a reduction in September. "Whether the U.S. economy is strong enough to withstand the next phase of a trade war is giving people concern right now," said Mike Loewengart, vice-president of investment strategy at E*Trade Financial in New York. "Then we add in what's at the disposal of the U.S. Federal Reserve, some begin to question whether tha...