Yield Curve Inversion Intensifies: Will This Time Be Different?

March 26, 2019 | ,

An inverted U.S. Treasury yield curve — one in which long term rates are lower than short term rates — is known by investors to be a predictive indicator of a market correction and subsequent recession to come. On Friday, the yield curve inverted between the one-month to one-year range vs. the 10-year for the first time since 2007, with the one-month to one-year range yielding 2.45%–2.49% vs. the 10-year yielding 2.44%. This is an extension of the inversion between the two-year and five-year, which began last December.

In this newsletter, we put the current yield curve inversion into historical context, examining the indicators of previous inversions and the various market corrections and recessions that have followed. We also look ahead, taking into account current optimism regarding Fed rate cuts and various other indicators in the credit markets, and note how investors can prepare for further changes.

Read> Yield Curve Inversion Intensifies: Will This Time Be Different?

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

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This chart description is for illustrative purposes only and its accuracy cannot be guaranteed. Please see full disclosures at end of PDF document in the web post. General description: Two-line chart showing Brazil CPI and Brazil Key Rate. Chart subtitle: Brazilian officials lowered the country’s key rate earlier this month in response to falling inflation. Chart source: Bloomberg as of August 2, 2023. Chart visual description: Data is monthly. Y-axis ranges 0-16%. X-axis ranges from January 2012 through April 2023 in 5-month increments; data is complete through July 31, 2023. Brazil CPI (YOY) is plotted in light blue line and Brazil Key Rate is plotted in dark blue line. Please contact us for the full dataset. End chart description. See disclosures at end of document.


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