The yield curve inverted last week. Well, the part everyone watches, the 10 year/2 year Treasury yield spread, inverted, closing the week a solid 7 basis points in the negative. The difference between the 10 year and 2 year Treasury yields is not the yield curve though. The 10/2 spread is one point on the Treasury yield curve which is positively sloped from 1 month to 3 years, negatively sloped from 3 years to 10 years and positively sloped again from 10 out to 30 years:
So, yes, parts of the yield curve are inverted but the short end of the curve remains fairly steep. That is an unusual situation with no recent comparable periods (back to the 1978 inversion). Typically, 10/2 inversions occur when the entire curve is flat with maturities shorter than 2 years going on to invert later at
Read More »