US returns 2 and 10 years reversed; sign of recession

(Bloomberg) The yield on two-year US Treasury bonds on Tuesday surpassed 10-year yields for the first time since 2019, reversing another segment of the Treasury curve and reinforcing the view that Fed rate hikes could provoke a recession.

The investment occurred when two-year yields increased while 10-year yields decreased, crossing at a level of around 2.39%. Prior to 2019, when the curve reversed in August during a trade dispute between the US and China, the last persistent reversal of the Treasury curve occurred in 2006-2007.

Short-term returns higher than long-term ones are abnormal, pointing out that high levels of short-term returns are unlikely to sustain as growth slows. The investment in the two- to 10-year segment of the Treasury curve is the latest in a series that began in October, when 20-year yields exceeded 30-year yields. In the last month, investment has reached the seven- to 10-year and five-to-seven-year segments, among others.

“Historically, there hasn't been a recession without an investment,” said Ben Emons, global macro strategist for Medley Global Advisors LLC. “It is very likely to be a predictor of a future recession. However, the timing is unknown. It could take up to two years.”

Original Note:

U.S. Two- and 10-Year Yields Invert, Flashing Recession Signal

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.