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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
US
As for 3M 10Y - as with the near-term forward spread, the most recent inversion began November 8th 2022, hit a low of -200bp in early May (the most inverted since exceeding -300bp in the early 1980s), and currently stands at -158.6bp.
- The New York Fed regularly publishes a probability of recession reading based on this spread and June's reading (at -155bp) implied a probability of US recession in June 2024 of 67%.
- At these levels, this measure has been "correct" in making a recession call in the past - with the only other times in history that the 3M10Y have been this inverted: 1929, 1973, and 1979, some pretty difficult years for the US economy.
- Yield curves have historically inverted between 6 to 24 months before recessions - if that holds true today, that general range puts any upcoming recession at between May 2023 and November 2025.
- In this respect the thing to watch for and be more worried about is when the spreads begin to aggressively dis-invert: this is a clearer signal that the Fed is set to cut rates in an economic downturn, eventually normalizing the curve.
Source: NY Fed
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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