The chart below can be downloaded here.
We know of no better economic or market indicator for signaling economic slowdowns & risk-off periods than the yield curve. An inversion of the yield curve (the spread between long-term & short-term Treasury yields) has signaled every recession in the last half century. Last week both the 2s/10s & 5s/30s Treasury spreads hit new lows for this cycle. Interestingly, both spreads rolled over at the end of September, which may correspond with the announcement of details on the Republican tax plan. It also comes on the heels of the FOMC crystalizing their program for shrinking the Fed's balance sheet. At 67bps, the 2s/10s spread is still a long way from inverting (the light isn't red yet), but it is the lowest reading in a decade. This has been and will continue to be an important monitoring point to help form our top-down views.
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