T-bills to Treasuries are back in danger of inversion

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.


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