An indicator of an upcoming recession in the US has moderated, with a sell-off in government debt markets bringing the spread between yields on shorter- and longer-dated Treasuries to the narrowest level in six months.
That spread, or yield curve, “inverts” when shorter-term yields exceed longer-term ones and this is typically regarded as an indicator of an economic slowdown.
The yield on the 10-year US Treasury topped 4.8 per cent on Tuesday for the first time since 2007 as strong economic data persuades investors the Federal Reserve will keep interest rates “higher for longer”.
Since the end of August, the rise in the 2-year Treasury yield has not kept pace with the 10-year, resulting in the spread between them reaching -0.34 percentage points on Tuesday, the tightest intraday level since late March. The spread exceeded -1 percentage point as recently as July.