Yesterday, one of three most important indicators for recessions, the yield curve slope, turned positive after the longest period of inversion recorded. For 783 days, the 2 year Treasury yield has been higher than the 10 year Treasury one, creating an anomaly, frequently associated with recessions. The record is not perfect, but it’s good enough to worry about it. If you look at the chart, you will see that yield curve inversions have a gray area next to them; those are the recessions declared by NBER. The Job openings report published yesterday, with a meaningful decline, gave the last push to the curve to turn positive. The next stop is the FOMC meeting, where the rate cut cycle should start. Once we clear that hurdle, the focus will be on GDP to see if the economy does indeed fall into recession or muddles through.
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