FYI: Though last week’s big bond-market moves gave investors a reprieve, the yield curve is still pretty flat. How worried should we be?
Markets started the year with Treasuries of different maturities eerily close. The two-year was at 1.9%; the 10-year at 2.46%—a difference of 0.56 percentage point—down from 1.24 points at the start of 2017.
More recently, a selloff in Treasuries pushed prices lower—and yields higher—after outgoing Federal Reserve Chair Janet Yellen affirmed a policy of continuing rate hikes, while warning about inflation. On Friday, the 10-year yield climbed to 2.84%, and the two-year to 2.14%.
A flat yield curve is unnerving in part because it’s the only step between normal and inverted: If the yield on the two-year Treasury moves above that of the 10-year, it’s a generally accepted predictor of a looming recession. As investors keep telling each other, the yield curve has inverted before each of the past seven recessions.
Regards,
Ted
http://www.cetusnews.com/business/Still-Worrying-About-an-Inverted-Yield-Curve-.SkbnuWRGLf.html
