Yield Curve Produces First Inversion in 7 Years

I have been watching the 5-3 and 3-2 yield spreads for months expecting an inversion would first occur there. Today, that happened.

Bloomberg also caught it, noting Flattening Yield Curve Just Produced Its First Inversion.

The spread between 3- and 5-year yields fell to negative 0.6 basis points Monday, dropping below zero for the first time since 2007. It’s probably not the best-known measure of the curve. The 2- to 10-year gap may have that honor. But Monday’s move could be the first signal that the market is putting the Federal Reserve on notice that the end of its tightening cycle is approaching.

Some analysts cautioned against reading too much into Monday’s inversion.

“It’s a minor part of the curve,” said NatWest Markets strategist John Briggs. “I don’t think it necessarily foreshadows anything.”

3-2 Inversion Coming Up

A 3-2 inversion is now in the batters box. I expect a base hit shortly.

Here are some charts that I have been watching. Fred is a bit behind on posting data so my charts date back to last Thursday.

Yield Curve Spreads 1980-Present

Image placeholder title

Yield Curve Spreads in 2018

RECOMMENDED ARTICLES

Image placeholder title

Yield Curve Spreads October 19 - November 29

Image placeholder title

Change in Yield Curve Spreads

Image placeholder title

Curiously, the 10-7 spread rose since October 19 while the rest of the curve flattened.

I disagree with the opinion of John Briggs. This is a strong recession warning. With the next hike, I expect more portions of the curve will invert.

The classic recession signal that most follow is a 2-10 inversion. I doubt we see a 2-10 inversion before recession hits.

My call: There will not be the warning nearly everyone is waiting for.

Mike "Mish" Shedlock

Recession Signal Getting Louder: 5-Year Yield Inverts With 3-Month Yield

The yield curve is inverted in 11 different spots. The latest is 5-year to 3-month inversion.

Yield Curve Inverted Out to Seven Years

Portions of the yield curve are once again inverted all the way out to 7 years.

Inversions Galore!

The number of US Treasury bond inversions took a big leap today. I count 5 inversions, three of them with the 1-Yr bill.

Number of Yield Curve Inversion Points Rises as the Long-Bond Yield Dives

The US Treasury 5-year yield is now inverted with 3, 2, and even the 1-year treasury yield.

Yield Curve Inversions Again Stretch Out 7 Years

Huge portions of the the yield curve are inverted. Most of the inversions are by tiny amounts, but it's another warning.

Reader Questions on Yield Curve Inversions as a Recession Indicator

Reader Eric is curious about yield curve inversions. He writes …

Near Full Inversion: 10-Year Note Inverts With 1-Month T-Bill

The yield curve nears full inversion. Every duration higher than 1-month other than the 30-year long bond is inverted.

On Average, How Long From Inversion to Recession?

Let's take a look at the last six recession. How long did it take from inversion to recession?

Yield Curve Recession Watch: 7-Year Treasury Yield Inverts With 1-Year

The yield curve is inverted in six places. Notably, the 1-year T-Bill yield inverts with all durations through 7 years.