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  • Germany’s bond yield curve inverts with the 10-year yield falling below the three-month yield.  
  • Germany’s entire yield curve is offering negative returns.  

Germany’s bond yield curve has inverted with the 10-year yield now trading below the yield on the 3-month bond.  

The spread between the two fell below zero on Aug. 6 and stood at -0.036 basis points on Monday. An inverted yield curve is widely considered a sign of economic recession. The Eurozone’s manufacturing powerhouse has been hit hard by the ongoing trade tensions between the US and China. Notably, Germany’s industrial production fell 5.2% in June  from the previous year, the biggest annual decline in almost a decade.  

It is worth noting that the 10-year and 3-month bonds are offering negative returns. The 10-year yield closed at -0.594 on Monday, while the 3-month yield closed at -0.558.

In fact, the entire German yield curve is offering negative returns for the first time on record.  

That makes the EUR a funding currency, the one which is used to fund high risk, high reward investments during risk-on action in the markets.  

Yield spread