While all eyes have been on the longer-end of the yield curve - as it collapses ever closer to recessionary-signaling inversion - traders have, for the first time since the financial crisis, inverted the Eurodollar curve - implying a rate cut is more likely than a rate hike in 2020.

Most investors have grown used to watching the '2s10s' or '5s30s' curves which have collapsed in the face of an endless barrage of global synchronous growth 'goldilocks' bullshit narrative...

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But, as Bloomberg notes, the spread between December 2019 and December 2020 eurodollar contracts fell below zero Wednesday for the first time, suggesting short-end traders don’t expect the central bank to raise interest rates at all after next year.. and in fact, are pricing in a higher probability of a rate cut. 

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The spread’s dip into negative territory is the culmination of trend months in the making as investors bring forward their expectations for when America’s economic expansion -- and therefore the Fed’s tightening cycle -- will end. 

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It contrasts with the most recent summary of economic projections, which shows that a majority of officials expect to hike rates once or twice in 2020 as the gap between The Fed's hopes and The Market's reality has never been wider...

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The divergence between trader and policymaker expectations is partly a product of contrasting views on whether productivity gains are set to drive further growth, according to TD Securities rates strategist Gennadiy Goldberg.

“The Fed expects productivity to pick up gradually in the coming years, raising the neutral rate,” said Goldberg. “The market appears to be taking an ‘I’ll believe it when I see it’ approach.”

Finally, we remind readers that as the short-end of the market inverts, suggesting the end of the tightening cycle is appreciably sooner than The Fed 'no recession in sight' hopes would assume, bond speculators are still convinced that higher rates are coming and have never been more bearish of bonds...

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Maybe Dr.Copper is on to something after all... 

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The Eurodollar curve is shouting loud that a recessionary impulse is coming soon and The Fed will have to admit it failed again.