The US yield curve continues to flatten amid geopolitical and trade tensions

Author: Justin Low | Category: News

The spread between 2y and 10y Treasury yields reaches its lowest point in more than a decade

The spread touched a low of 45.69 basis points in yesterday's trading and today remains near the lows today as well. That's the lowest level we've seen in the spread since 2007 - before the last recession kicked in.

As mentioned earlier in the week, it's not a shoe-in indicator of a recession if the yield curve becomes inverted - though some quarters in the market do stand by that - but historically it's never been a good sign.

And with things like this, some times it can act like a self-fulfilling prophecy.

While the Fed may be quite happy to see signs of inflation picking up - and with oil prices at 3-year highs it certainly doesn't do any harm to inflationary pressures - this is one of the uncertain elements that could weigh on policy decision later this year.

Will the Fed brush this sign aside or will it heed the warnings from the past? Only time will tell.

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