Equities Are on ‘Borrowed Time’ as Recession Signal Nears Inversion
- Key portion of Treasury yield curve is narrowest since 2007
- Inversion of 2s10s curve typically precedes stock market peaks
This article is for subscribers only.
Even as U.S. equities rally on the latest trade war developments, strategists at Bank of America Corp. are turning to a trusted recession indicator to figure out just how much time the stock bull run has left.
They’re focusing on the spread between 2- and 10-year Treasury yields, whose inversion has tended to precede recessions in the past. On Tuesday, the 10-year notes traded with a yield less than 2 basis points higher than 2-year notes, the narrowest level since 2007. One closely watched portion of the curve is already deeply inverted, but warning signs are growing as another flip nears.