Yield Curve Is Entering the Danger Zone
- Two- to 10-year Treasury curve approaches narrowest since 2007
- Recessions typically follow curve inversions, LaVorgna says
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When it comes to the Treasury yield curve, going inverted isn’t the “great move” that Tom Cruise boasted about pulling off when piloting his F-14 Tomcat jet in the cult classic movie Top Gun.
After widening in early February, the trend has reversed with yields on two-year notes approaching those on 10-year securities again. That’s put the risk of an inverted curve, when short-term yields are higher, back on analysts’ radar. JPMorgan Chase & Co. strategists say a slight inversion seen already in money-market forward rates that serve as a proxy for the federal funds rate means it might only be “a matter of time until” until the overall curve turns on its head.