The yield on the 3-month Treasury (4.085%) had surpassed that of the 10-Year Treasury (3.969%). Such an inversion is very rare, but it suggests that a recession is on the way or even here.
The yields have inverted for the first time since March 2, 2020, during the onset of the US COVID-19 pandemic.
The inversion has occurred as investors, concerned about rising interest rates amid Fed tightening, allocate more capital to bonds with shorter maturities. That part of the curve has less duration risk, or sensitivity to changes in rates.
That the 3-month/10-year spread has fallen below zero already means that the recession countdown has begun, and the Fed's need to keep hiking interest rates in order to contain inflation is driving the yield curve in ways that are also potentially pushing the economy off the cliff in terms of a recession.
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