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5-year GBP swap rates fall by nearly 50% since January 2019!

Earlier this month the 5-year swap rate Vs 3-month LIBOR reached a low of 0.69% in contrast to the high seen in January 2019 at 1.29%; a near 50% reduction in 6 months

Similarly the difference between the 5y swap rate mentioned above & base rate, at -6bp (5y swap – base rate) this is the first time it has turned negative since the financial crisis back in 2007. In recent years after the Brexit referendum in 2016, the spread approached zero but failed to go negative, (see chart below).



Is this a prelude to base rate reductions and a Uk recession, or has the market got it wrong and these are cheap levels to borrow in the medium term?.


Similarly looking at the US market and comparing 10-year treasury yields with 3-month yields, the inversion of the yield curve is even more pronounced.

Are these above inversions of both the UK and US curves a prelude to a global recession, coupled with the recent slow down in  the worlds second largest economy China which this week posted its lowest quarterly growth in 26 years at 6.2%