Yield curve inversion nears December high

The inverted spread between short-term and longer-term US Treasuries widened further on Monday, closing in on the recent peak reached in December.

The two-year Treasury yield was 82 basis points above the 10-year Treasury yield at midday Monday, significantly wider than Friday’s 77 basis point spread.

In December, the spread widened to 84 basis points.

This is called an “inverted yield curve” because long-term bonds generally have higher yields than short-term bonds. An inverted yield curve is considered a reliable sign that a recession is looming as it indicates that investors expect lower rates in the future.

The 2-10 yield curve has inverted since July. Reversals last 13 months, on average, according to Joe Lavorga, SMBC’s chief economist. The three-month to ten-year yield curve, seen by some economists as an even more reliable indicator of a coming recession, has inverted since October. obligations