An inverted yield curve is when interest rates on long-term government bonds are lower than interest rates on short-term government bonds. This could mean an impending recession. An inverted yield curve appears about 12 to 18 months before a recession.
- US10Y – US02Y flipped as deeply as the 1980s.
- The 2/10 spread has flipped almost 30 times since 1900. In 22 cases, the recession continues.
- Moreover, the 3-month and 10-year spread reached its deepest reversal in decades of -100 bps.
- This reversal points to the Fed’s policy fallacy, which is that while the Fed stops inflation, it can also destroy the economy.
The most severe reversal since post-1981, likely a recession in the second half of 2023 or early 2024, first appeared on CryptoSlate.