YC2YR 2-10 Yield Curve Daily Chart; Inversion Drops to -110 Bips but Un-Inverts with Hook Pattern Signaling Recession Ahead

It has been interesting following the 2-10 yield curve watching for the hook pattern that will usher-in the US recession. Here is the first chart that shows the past recessions brought on by the hook. Then another chart showing fake-out moves. Then the prior 2-10 yield curve chart that was set up with a bottom with positive divergence but Pope Powell laid an egg promising higher rates forever.

That brings us to today with the US Monthly Jobs Report about to drop. The 2-year yield has dropped from a peak of 5.08% only a couple days ago to 4.82% as low as 4.76%. The 10-year yield is at 3.82% so the 2-10 spread recovers higher to -94 bips.

The jobs number drops and the 2-year yield drops below 4.70% to 4.69%. The 10-year yield is at 3.77% so the 2-10 spread moves higher to -92 bips. You can smell a whiff of recession in the air.

The green lines show positive divergence wanting the yield curve to move higher (become less negative). Ditto the Aroon where those that believe the yield curve will drop are almost 100% convinced it will drop further and those that do not believe it will drop are also convinced nearly 100% that it will move lower. This is a contrarian signal hinting that the bottom is likely in or extremely near for the yield curve (no one believes that he yield curve will move higher). The spread is also below the moving average ribbon requiring a mean reversion higher and the lower standard deviation band is violated wanting the spread to move higher.

Time will tell. If the hook pattern continues higher (2-10 yield spread (yield curve) becomes less negative moving back up toward the zero inversion line), the US recession is a lot closer than anyone thinks. 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.

Note Added 9:18 AM EST: The 2-year yield is at 4.71% and 10-year at 3.78% for a 2-10 spread at -93 basis points.

Note Added 9:30 AM EST: The 2-year yield is at 4.69% and 10-year at 3.77% for a 2-10 spread at -92 basis points.

Note Added 9:34 AM EST: The 2-year yield is at 4.66% and 10-year at 3.75% for a 2-10 spread at -91 basis points.

Note Added 9:39 AM EST: The 2-year yield is at 4.61% and 10-year at 3.73% for a 2-10 SPREAD AT -88 BIPS. The hook expands higher telling the recession to step forward.

Note Added Monday Morning, 3/13/23, at 5:15 AM EST: The US yields plummet on the Silicon Valley Bank failure; 2-year 4.35%, 5-year 3.80%, 10-year 3.61%, 30-year 3.67%. The 2-10 SPREAD UN-INVERTS UP TO -74 BASIS POINTS. IN ONLY 3 DAYS, THE 2-YEAR YIELD FALLS OVER 70 BIPS THE MOST SINCE THE 1987 STOCK MARKET CRASH. THE 2-10 SPREAD HOOK PATTERN LAUNCHES HIGHER FROM -110 BIPS TO -74 BIPS SIGNALING THAT THE US RECESSION IS LIKELY CLOSER THAN ANYONE REALIZES.