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A Connection Between Treasury Bond Inversion and Copper Prices? Maybe.

July 23, 2018
The Copper Journal's John Gross says over the past 40 years or so, the spread inverted a number of times, often coinciding with higher copper prices, but it would be a stretch to say there was a consistent relationship each and every time.

There has been a lot of talk recently about the 2-year and 10-year treasury yield becoming inverted, and what it may or may not portend for the economy.  On the numbers, the 2-year finished the week at 2.60%, while the 10-year went out at 2.89%, giving us a spread of just + .29%.

In order to get some perspective, we looked at monthly average numbers over a longer time period. Over the past 40 years or so, the spread inverted a number of times, often coinciding with higher copper prices, but it would be a stretch to say there was a consistent relationship each and every time. Nevertheless, with the spread in a downtrend, and narrowing to just + 0.38% during June, we will watch patiently to see what happens, particularly in this difficult environment.

Although prices bounced higher on Friday, ostensibly in response to a weaker dollar, it was another tough week for metals, as support lines were breached, and / or new lows were posted. We are beginning to wonder what that light is at the far end of the tunnel.

John Gross is publisher of The Copper Journal. If you would like to learn more about profitably managing your wire and cable inventory, hedging strategies or gaining additional insight into metals pricing, email John by clicking here or calling him at 631-824-6486.