Don’t fear the inverted yield curve

This is Bloomberg Opinion Today, a hyper-realistic cake of Bloomberg Opinion’s opinions. Sign up here.Today’s Agenda The yield curve is inve [Bloomberg]( Follow Us [Get the newsletter]( This is Bloomberg Opinion Today, a hyper-realistic cake of Bloomberg Opinion’s opinions. [Sign up here](. Today’s Agenda - The [yield curve]( is inverted. - [Shanghai]( is in lockdown. - [Russia]( is a former space power. - Germany has [two]( [problems](. Not All Inverted Yield Curves Are Bad Vampires Wall Street likes to fawn over yield curves just about as much as [any admirer of beautiful people]( drools over Robert Pattinson’s exquisite jawline in “The Batman.” In both cases, it’s impossible to look away. Fittingly enough, Pattinson’s bone structure [graced]( movie theaters in “Twilight” in 2008, just after [Lehman Brothers collapsed]( and a bit longer after the last significant “inversion” of the yield curve — that rare thing where longer-dated Treasuries yield more than shorter-dated ones. Such an inversion occurred again today, with the two-year yield briefly topping the 10-year yield for the first time since 2019: This is bad news for banks, who borrow short and lend long. Worse, it tends to be a harbinger of a [recession](. But it’s far from a perfect one. The brief 2019 inversion was followed by a recession, but only because Covid came along and pushed the global economy into freefall, writes Robert Burgess. Given current financial conditions, [economists are less worried about a recession]( now than they were in 2019, he notes. John Authers points out the “Batman” [yield inversion of 2022 is very different]( from the “Twilight” inversion of 2008, largely because the Fed has been keeping long-term rates artificially low. Shuli Ren argues it’s a [shame the Fed has broken]( what was once a reliable recession gauge. Bill Dudley counters that the Fed has done worse than that, [dooming us all to a recession]( by waiting too long to fight inflation. But Dudley’s opinion is still in the minority. Just as Bella Swan held her own amid covens of vampires and werewolves, maybe we can learn to coexist with an inverted yield curve, however distracting it may be. Is It Covid? During pandemic lockdowns, some people became freakishly good at baking. I’m not just talking about your plain-Jane focaccia or sourdough here, I’m talking about those frighteningly realistic cakes that [have the power to make your skin crawl](. [These eggs?]( They’re cake. [This sneaker?]( Cake. [The illusion-cake phenomenon]( has even made it to Netflix, in the form of a show called “[Is It Cake](?” which I may or may not have binged in one weekend. At this point, who knows what cake is hiding in plain sight. You’ll just have to start cutting into things with a knife to be sure. The Covid equivalent of cutting into everyday objects to find out if they’re cake is mass testing, a practice about which Shanghai was quite lax until now. Throughout the pandemic, the city of 25 million people carried out Covid testing on the honor code. But last week, the government threatened to restrict citizens from shopping and taking public transportation if they didn’t get tested. Duh, of course, the number of cases went through the roof! Everyone has Covid, and everything is cake: Unlike the rest of China, Shanghai sailed through the pandemic with little to no disruption from Covid. But Shuli Ren suggests [its lax interpretation of China’s broader Covid-zero policy]( backfired. Now the whole city is locked down for the first time. Maybe they’ll learn to bake. Further Covid Reading:  [Do you really need a fourth Covid shot?]( It depends. — Lisa Jarvis Putin Lost the Star Wars Vladimir Putin’s invasion of Ukraine has repercussions beyond the death and misery of the war and the immediate impact of sanctions on Russia's economy. By destroying his relationship with Europe, Putin has also single-handedly [wrecked Russia’s once-vaunted space program](, writes Adam Minter. Here on Earth, Putin is also losing an entire technology sector, adds Tim Culpan: [70,000 Russians in the tech industry have already packed up their hard drives]( and headed to countries such as Armenia, Georgia and Dubai, where Russians don’t need a visa. As Russia’s toys and talent disappear, will Putin realize his war is destroying his own country’s future? Bonus Ukraine War Reading: - A war-crimes tribunal would [hold Putin accountable]( and could help end the war. — Bloomberg’s editorial board - Putin’s Ukraine playbook is eerily [similar to that of its Chechen wars](. — Clara Ferreira Marques - [How to keep Russian sanctions from ending as disastrously]( as reparations did a century ago. — Karen Petrou Telltale Charts German [housing prices have doubled in the span of 12 years](, but that’s not stopping people from plowing more money into them, writes Chris Bryant. Betongold — or concrete gold – has long been a hedge against rising inflation: Maybe the only entity that's *not* rising in Germany is [the Rhine River, which adds to a long list of headaches]( for investors, explains Javier Blas. If the waterway dries out, then a key artery for industrial commerce will be unusable. Further Reading [OnlyFans is looking for an eligible SPAC suitor](, but it turns out Wall Street isn’t all that into porn. — Mark Gongloff Japan’s [obsession with inflation]( is a double-edged sword that will hit consumers the hardest. — Daniel Moss What Donald Trump did after losing the election is obviously illegal, but for a [federal judge to admit it]( is huge. — Jonathan Bernstein Why is [Attorney General Merrick Garland]( taking so long to come to the obvious conclusion about Trump’s wrongdoings? — Tim O'Brien [If tech CEOs want to keep employees happy](, they can't afford to ignore their bad stock performance. — Trung Phan ICYMI There are [huge gaps in Trump’s Jan. 6]( records. Maybe [housing is in a bubble]( after all. Where does your recycling actually go? Follow the [2,000 mile-long journey]( of one grocery bag. Kickers Seas of cargo shorts and flip flops spell [the demise of men’s fashion](. “Hello Human,” says the world’s first [robot burger vending machine](. From 10 a.m. to 10 p.m., there’s always a line outside [New York’s most popular Ukrainian restaurant](. (h/t Scott Kominers) Notes:  Please send robot burgers and feedback to Jessica Karl at jkarl9@bloomberg.net. [Sign up here]( and follow us on [Instagram](, [TikTok](, [Twitter]( and [Facebook](. Like Bloomberg Opinion Today? [Subscribe to Bloomberg.com and get much, much more](. You’ll receive our unmatched global news coverage and two in-depth daily newsletters, The Bloomberg Open and The Bloomberg Close.  Before it’s here, it’s on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can’t find anywhere else. [Learn more](. You received this message because you are subscribed to Bloomberg's Bloomberg Opinion Today newsletter. [Unsubscribe]( | [Bloomberg.com]( | [Contact Us]( [Ads Powered By Liveintent]( | [Ad Choices]( Bloomberg L.P. 731 Lexington, New York, NY, 10022