Deepest Bond Yield Inversion Since Volcker Suggests Hard Landing
- US 2-year yield exceeds 10-year by a full percentage point
- Upside-down bond market anticipates Fed policy doing damage
This article is for subscribers only.
The bond market is doubling down on the prospect of a US recession after Federal Reserve Chair Jerome Powell warned of a return to bigger interest-rate hikes to cool inflation and the economy.
As swaps traders priced in around a full percentage point of Fed hikes over the next four meetings, the yield on two-year Treasury notes touched 5.08% on Wednesday, its highest level since 2007. Critically, longer-dated yields remained in check, with the 10-year rate under 4% and the yield on 30-year bonds lower.