Market Overview Analysis by Alfonso Peccatiello covering: 10-2 Year Treasury Yield Spread. Read Alfonso Peccatiello's latest article on Investing.com
But it’s when a recession hits, the Fed cuts rates and the curve steepens that you become s**t scared.
A steep yield curve instead signals accessible borrowing costs feeding into expectations for solid growth and inflation down the road . Think of 2016: Fed Funds already basically at 0% and weak global growth. Yields stay put at the front-end and could meaningfully move lower only at the long-end, hence bull-flattening the curve.Late 2020, early 2021: the Fed was keeping rates pinned at 0% and stimulating via QE but the economy was flooded with fiscal stimulus and ready for reopening.
As you can see, understand yield curve dynamics in the context of the growth setup can provide with important cross-asset macro signals.The chart below shows the trend in US private job creation in the months following a persistent yield curve inversion. A potential dis-inversion right here would be the last step in the historical recessionary sequence.
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