Recession Indicator ~ The Inverted Yield Curve

Today we reached a definitive milestone, as it relates to the 10yr / 2 Yr Inverted Yield Curve.

​Although it has inverted several times during the past week, the inversion has been for only a short period of time.

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As illustrated below, both the 10Yr and 2 Yr have been quite strong today; the Two Year is fully 4 basis points below the 10 Yr.

Source: The Wall Street Journal

Shown graphically below, the entire Yield Curve is inverted well beyond the 10 Yr.

Source: The Wall Street Journal

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Below is the Fed's favored recession indicator - the 3 Mo / 10 Yr Yield Curve, which has been inverted for a couple of months.

Below is the Market's favored recession indicator - the 2 Yr / 10 Yr Yield Curve, which has finally put in a more permanent appearance. As clearly indicated, the 2 Yr / 10 Yr inversion has preceded each recession in the last 40 years. Whereas, as you can see, the 3 Mo / 10 Yr has been relatively consistent but failed to give an appropriate signal in the very critical 1980 recession, one of the most vicious in the past century.  

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