A part of the Treasuries yield curve inverted yesterday for the first time in more than ten years. Various yield curves such as the 3 to 5 and 2 to 5 years yield curves fell below zero.

The biggest recession indicator is the 2 to 10-year yield curve. If a recession is looming or not is to be seen, but yesterday’s move could also be signalling the market is pricing in a slightly different Fed cycle than has been priced in lately. Is the end of the tightening cycle approaching sooner than most investors thought?

The US 10 year broke below the huge 3% level.

Some investors seem to attribute the short-end underperformance to the G20 meeting and the outcome we saw, but we are unsure of that.

The outright inversion could simply be that the market is starting to price in cuts starting sometimes in 2020. Whatever the reason, watch this space carefully.

Source: charts by Bloomberg