The Treasury yield curve has now almost totally inverted
The Treasury yield curve has now almost totally inverted
– by New Deal democrat
One of the few leading indicators not flashing red for recession has been the short end of the Treasury yield curve, which has been relentlessly positive – until now.
While the 10 year minus 2 year Treasury spread has been negative for months, the 10 year minus 3 month had remained positive. But twice in the last two weeks the 3 month Treasury has yielded more than the 10 year Treasury:
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiVg3XwVJPzPM24EbU04Ns0YzB0mOmo2YihwETSf6h0DMu7mt-F2r-WXopVWcvqLW6hq7N0F-ph5xEon_DKt7z1SM5-0ni8XbjZvzmmtJqtT9A0kuG5pI5XqdG1tYc_o7vGysCijs50nm5_bfq7v2n7IHdyX6iOY-w7I376m2-AUzQ9dY-fS7Og3yioRg/w400-h174/43744667-2932-49E7-8DD9-72C7DC043B63.jpeg)
The highest yielding Treasury is the 1 year maturity. Further, the 6 month Treasury is now yielding more than the 2 year. In other words, almost the entire Treasury yield curve is now inverted:
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh1Zgh7_WplABSNUXQNaUZtcWGJ91AG8cfqJwv7Um-NU2IUAQwzvjv8HJfcDlotLKj-34zBr1ZmSMG7Fu8TwPv98GFRzMV7ytivrudzFbnDHJDPZio00WmqvwQOcYHDTxoIsOsEZz9-oxDjq-cqg0bfiTdW6sPFHHauuTQdvg46Aj4UoEdWunXD3sXfDQ/w321-h400/2FB7E395-3606-4961-8CA2-1C3DDCE272CD.jpeg)
The curve remains positive from the Fed funds rate out till 1 year. That’s the only part of the curve that hasn’t inverted yet.
That leaves about the only major indicator that hasn’t rolled over yet is corporate profits, which have been more or less flat, but haven’t really turned down.
“The US Treasury yield curve is on the verge of inverting,” Angry Bear
The Fed has declared their intention to cause a recession.
Their actions align with their declaration.
The bond market believes them.
Ken:
Oh, for sure. We are going down
https://www.investopedia.com/articles/basics/06/invertedyieldcurve.asp
“…How Well Do Inverted Yield Curves Predict Recessions?
An inverted yield curve in U.S. Treasuries has predicted every recession since 1955, with only one false signal during that time…”
Ron,
could you suggest why this is so?
Coberly,
The linked article that I provided said a lot more about the topic and this little bit stood out some to me this AM, but it was overall a fairly decent article without any glaring mistakes or obvious ommissions.
“…The Formation of an Inverted Yield Curve
As concerns of an impending recession increase, investors tend to buy long Treasury bonds based on the premise that they offer a safe harbor from falling equities markets, provide preservation of capital, and have the potential for appreciation in value as interest rates decline. As a result of the rotation to long maturities, yields can fall below short-term rates, forming an inverted yield curve. Since 1955, equities have peaked six times after the start of an inversion, and the economy has fallen into recession within seven to 24 months…”
Ron
dear God. I am sorry.