The Fed’s recent meeting has left many investors in a state of flux, with Janet Yellen going in one direction after the market.
While some appreciated what the Fed had done in terms of the possibility of it being the last hike, if you take a closer look at the two-day, two-year, and ten-year bond yields, it becomes clear that the two-year bonds are now winning the race, keeping up with the tens, which means the curve is less inverted.
Looking back to September, it’s apparent that they are now very close to a similar formation, with the lowest yields on a closing basis since then.
As two-year bonds lead the race down in yields, the three-month to ten-year spread is near the most inverted back into the 80s, the true recession spread, with four basis points away from the bogey from January, which was minus 125 minus 129.
Furthermore, Boon yields and ten-year best deals overseas are getting closer together, as seen on a chart, and they are near the closest they’ve been since mid-2020.
This is a significant development, especially considering that the Fed has led the way.
Finally, even though Boon yields are getting closer and closer together, a few basis points could make them the closest together going back to 2014.
