by Mish

Bloomberg reports U.S. Recession Odds Climb to 55% as Yield Curve Flattens.

Recession Odds

“What are plummeting interest rates saying about the outlook for the economy? The spread between the yield on 10-year U.S. Treasury notes and two-year notes is the narrowest since 2007. A model maintained by Deutsche Bank analyst Steven Zeng, who adjusts the spread for historically low short-term interest rates, suggests the yield curve is now signaling a 55 percent chance of a U.S. recession within the next 12 months.”

Yield Curve Flattens Again

On June 10, I noted Yield Curve Flattens Again: 30-Yr Yield Just 19 Basis Points From Record Low

The chart has not changed much since then.

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Recovery Increasingly in Question

  • The 30-year long bond is just 19 basis points from the low set in January of 2015.
  • The 10-year note is just 20 basis points from the low set in July of 2012.

Ten-Two Spread 2013-Present

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Ten-Two Spread 1976-Present

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Is it different this time? I think so and so does Deutsche Bank Model.

Mike “Mish” Shedlock

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