Treasury Yield-Curve Inversion Reaches a Four-Decade Extreme
- Two-year yield exceeds 10-year by more than 58 basis points
- Expected peak in Fed policy rate next year exceeds 5%
The US Treasury building in Washington, DC.
Photographer: Samuel Corum/BloombergThis article is for subscribers only.
A key segment of the US Treasury yield curve reached new extremes of inversion Thursday, touching a level not seen since the early 1980s when the Federal Reserve also was aggressively tightening policy.
The two-year note’s yield exceeded the 10-year note’s by as much as 58.6 basis points. The inversion briefly exceeded 58 basis points on Aug. 10, last seen about forty years ago when then-Fed Chair Paul Volcker’s rate hikes to break inflation tanked the economy. Curve inversions have a track record of preceding economic downturns by 12 to 18 months.