2-year yields are up nearly 4 bps to 2.42% while 10-year yields are up 2.5 bps to 2.50% on the day. An inversion of the 2s10s looks imminent but I would argue perhaps the market has already come to terms with that. I’ll save the recession indicator talk for another time but just be wary of that signal and it will be one that broader markets will take notice of as well.
As things stand, the selloff in the bond market is still continuing. It’s tough to fight the momentum of things at the moment, as has been the case with yen pairs over the course of March trading.
Be it the focus on rates or inflation – or even both – the pace of the selloff has already been a rather brutal one. The question now is, where do we go from here? Is it going to be a case where the inversion signal puts a stop to proceedings? I mean, that is one way the market could satisfy its need to hint at a policy error by the Fed. I outlined more on that two weeks ago here.
It’s tough to say for sure but more often than not, the charts don’t lie in situations like these. I’d keep the focus on this long-term channel in 10-year Treasury yields if anything else:
Talk about a bubble, yeah?