Treasury Curve Signals Recession Risk as Fed Tightening Looms
- U.S. 5/30-year yield spread is near tightest since May 2020
- Spread may shrink to zero, says Asset Management One’s Takei
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A flattening Treasury yield curve signals increasing concern Federal Reserve efforts to keep inflation in check will derail the recovery in the world’s largest economy.
The yield premium 30-year bonds offer over 5-year equivalents fell toward a 17-month low this week, as U.S. consumer prices once again outpaced forecasts. Now around 100 basis points, the flattening has accelerated since June when Fed officials signaled two rate hikes by the end of 2023.