Fed’s Yield-Curve Barometer Starts Flashing Recession Risk
- Ten-year Treasury note’s yield lower than three-month bill’s
- Swaps still price in a three-quarter point hike next week
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A classic recession warning is flashing in the US Treasury market, where the 10-year note’s yield fell below the three-month bill’s, a rare occurrence that signals investors anticipate dire economic consequences of the Federal Reserve’s campaign against inflation.
The 10-year dipped as much as 0.08 percentage point below the three-month in US trading Wednesday, after brief and smaller inversions Tuesday and in early August. The day’s lows for both yields were reached shortly after the Bank of Canada raised its policy rate by half a percentage point, less than expected.