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3-Month to 30-Year

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The 3-month to 30-year inverted on October 18, 2022, and has been inverted ever since.

Treasury Yield Spreads May 01 2022 to January 5, 2023

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The 2-year to 10-year inversion is one of the most widely followed recession indicators. It has been inverted continually since July 6, 2022.

The 3-month to 10-year inversion is even more extreme. It has been continually inverted since October 18, 2022. 

Terrible Economic Data

The December jobs report was anemic and the ISM services PMI was an outright disaster.

Although housing in the gutter and the rest of the economy sinking fast, the Fed is committed to a course of action to maintain credibility.

To steepen in the traditional sense first requires the curve to flatten. With the Fed holding rates higher for longer, that won't easily happen unless the Fed panics due to a credit event.

Given that the Fed has repeatedly vowed to keep rates higher for longer regardless of economic slowing, do not expect the curve to steepen other than by deeper inversions until recession hits. 

For more discussion on this idea please see Hello Curve Watchers, the Yield Curve is Steepening, Just Not in the Normal Sense

Here is a key idea regarding the stock market:

In the 7 recessionary episodes of the last 50 years, the US stock market bottomed on average:

- 12 months after (!) the first Fed cut

- 13 months after (!) the trough in unemployment rate

After, not before...

— Alf (@MacroAlf) January 9, 2023

More By This Author:

Hello Curve Watchers, The Yield Curve Is Steepening, Just Not In The Normal Sense
ISM Services Plunges 6.9 Points Into Contraction, Another Recession Warning
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