RECESSION BAROMETER: August 14, 2019
SPOTLIGHT on : U.S. 10/2 Inversion – INVERSION WATCH: USA
eResearch considers the 10-Year/2-Year yield curve ratio to be the most important metric to assess the possibility of an Economic Recession occurring in the near future. While we watch other yield curve ratios and factor in their performance, we believe a 10/2 inversion is the most reliable harbinger of recession.
There have been numerous reports in the media this week that the 10-Year/2-Year Treasury yield curve ratio has INVERTED: Intra-day, maybe, I don’t know. BUT, we use ONLY the close-of-day yields and, on this basis, the respective 10/2 yields have NOT inverted.
Here are the yields for last week and this week to date, to the close on Wednesday:
Date 10-Year 2-Year Spread
| 5-Aug-19 | 1.75 | 1.59 | 0.16 |
| 6-Aug-19 | 1.73 | 1.60 | 0.13 |
| 7-Aug-19 | 1.71 | 1.59 | 0.12 |
| 8-Aug-19 | 1.72 | 1.62 | 0.10 |
| 9-Aug-19 | 1.74 | 1.63 | 0.11 |
| 12-Aug-19 | 1.65 | 1.58 | 0.07 |
| 13-Aug-19 | 1.68 | 1.66 | 0.02 |
| 14-Aug-19 | 1.59 | 1.58 | 0.01 |
The table above shows that the Spread between the 10-Year Treasury yield and the 2-Year Treasury Yield has narrowed almost each day over the past eight days.
On Wednesday, the Spread was a mere 0.01x. This is NOT Inversion.
REPEAT: There is NO Inversion between the 10-Year and the 2-Year Treasuries. However, clearly, it is very, very close.
As usual, we will be updating our Recession Barometer at the end of the week. Stay tuned.
