A closely watched measure of the yield curve that serves as one of the bond market’s most reliable recession indicators inverted on Tuesday, underlining fears about the economic outlook as the Federal Reserve considers aggressively hiking interest rates.The widely followed spread between 2-year BX:TMUBMUSD02Y and 10-year Treasury yields BX:TMUBMUSD10Y dipped below zero, and is down from more than 160 basis points a year ago. The last time the spread inverted was on Aug. 30, 2019, based on 3 p.m.
“Bond markets continue to reflect mounting pessimism over the outlook for economic growth,” despite a recovering stock market, said Mark Haefele, chief investment officer at UBS Global Wealth Management. Already, inversions have struck elsewhere along the U.S. Treasury curve. Spreads between the 5- and 7-year Treasury yields versus the 10-year, along with the gap between 20-and 30-year yields, have all been below zero.
The chart below, compiled in February, shows how long it took the 2s/10s to invert ahead of past recessions versus this year’s pace. The 2s/10s spread has traveled toward zero within a matter of months, this time around — as opposed to the years that it took during its last two trips into negative territory.
What recession? Dow, S&P & Nasdaq all surging. 😅
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