Yield spread nears zero
The yield curve was on the tip of everyone’s tongue two months ago after it briefly inverted. It cooled as fears of a US recession fell and economic data improved.
But with trade war risks back in play, so is the yield curve. US 3-month t-bills yielded as high as 2.346% today while 10-year yields were as low as 2.392%. That puts the curve only 5 basis points above inversion and is the narrowest since late March.
Meanwhile the six-month bill to 10-year is already inverted and everything short of 10-years has been inverted for awhile.
So the signals from stocks and FX have been mixed, the Treasury market continues to paint a much more worrisome picture. The Fed funds futures market continues to price in a 71% chance of a rate cut before year end.