Bond market close to sending biggest recession signal yet

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The bond market could soon send its loudest recession warning yet, if the closely watched 10-year yield falls below the 2-year note yield.

The Treasury yield curve has been warning about a recession, but strategists say it's about to send an even louder and stronger message, as the 10-year yield looks set to fall below the 2-year note yield.

"It's the whole idea that the Fed is making a mistake. There's more fear that the Fed is going to be slow in making moves, and the economy is going to to into recession," said one strategist.As Wall Street economists up the odds for a recession in the coming year, the bond market is sending its own scary warning about an economic downturn.

The 10-year yield, at its low yield of 1.64% Monday came less than 6 basis points above the 2-year yield, which was at 1.58% in afternoon trading. The spread broke below 10 basis points last week. An inverted curve simply means a shorter-term interest rate is higher than the longer-term one that it is being compared too, and that inversion has been a reliable recession signal.

 

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