Yield-Curve Inversion Trade Seen Roaring Back After FOMC Minutes
- Treasury 2s10s spread may fall below zero within weeks: BMO
- Inversion ‘is certainly a 2019 story,’ says strategist Hill
Wednesday’s release of minutes from the Federal Open Market Committee’s January meeting has the potential to send one of the most widely-followed parts of the Treasury yield curve hurtling toward inversion within a matter of weeks.
That’s the view of BMO strategist Jon Hill, who says that the gap between 2-and 10-year notes -- which bottomed out at 9.1 basis points in December and currently stands at about 14.3 basis points -- could resume its narrowing trend should the minutes tilt either of two ways: The Federal Reserve signals that another interest-rate increase may be on the horizon even without clear signs of longer-run U.S. economic improvement, or if policy makers saw the risks of a recession as greater than they’ve let on while reaffirming a preference for keeping the fed funds target rate unchanged.