YC2YR US 2-10 Yield Spread Yield Curve Daily Chart; 3-5 Spread and 2-5 Spread Inversion; Yield Curve Inverts First Time Since 2007

The first yield curve inversions occur after over a decade. Yesterday, Monday, 12/3/18, the 3's to 5's inverted. Hours later, which is only hours ago here on Tuesday, 12/4/18, the 2's to 5's invert.

As of 5 AM EST (10 AM London; 11 AM Frankfurt and Paris), Treasury yields are;
2-year yield 2.81%
3-year yield 2.81%
5-year yield 2.81%
10-year yield 2.95%
30-year yield 3.22%

The 3 to 5's inverted by 0.6 basis points yesterday and the 2's to 5's inverted by a basis point a few hours ago. The key yield curve indication is the 2-10 spread since it handles the meat of the curve. The chart above is through yesterday. As this is typed, the 2-10 spread is down to 13.3 bips edging ever closer to inversion.

The reason folks are getting worked-up over the inversion is that it signals a recession on the come. A recession typically follows in about 24 months after the 2-10's invert. For the last nine cycles, the 2-10 inverted about 16 months before the recession began. The shortest time was about 9 months.

The last time the 3-5's inverted was back in 2007 and the recession and 2008-2009 financial crisis appeared 28 months later.

The majority of traders are whistling past the graveyard saying there is no need to worry since the real intense stock market selling does not occur until the yield curve inverts (narrows) and then begins steepening (widening) again. In the chart you see a steepening from 2000 to 2002 when stocks were tanking and also a steepening from 2007 to 2009 which was the stock market crash. Thus, no need to worry says market participants. Traders sip Fed wine and ECB champagne each day buying stocks without fear or concern.

However, the Federal Reserve's grand near-10 year Keynesian financial experiment continues with an uncertain conclusion ahead. The Fed has failed to create sustainable inflation after years of printing money like madmen. Now the yield curve is inverting indicating an end to the current economic cycle.

Note the inversion back in 2000. The recession back then occurred quickly after that inversion. Considering that the Fed and other global central bankers have destroyed all price discovery over the last decade, the recession may actually be at our doorstep and no one realizes it.

Keep watching the 2-10 spread. When it hits zero, it officially signals a flat and inverted yield curve and that a recession is coming at us anytime in the weeks and months ahead. Consumers may pull in spending knowing that the hard times are coming. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.