Today’s yield curve is inverted – more so than it has since the 1980s. The U.S. Yield Curve (10yr treasury -- 2yr treasury) is a bone chilling -78 basis points of inversion. History tells us this may be especially troubling: the U.S. yield curve (10yr – 2yr) has inverted before each recession since 1955, with a recession following between 6 and 24 months. An inverted yield curve offered a false signal just once during that timeframe, according to a report by the San Francisco Fed. Now the worst since Q3 1981, when it inverted by -170 bps, this is the clearest signal yet that trouble may be on the horizon for the economy.
Against this backdrop, the rate of change in interest rates is unprecedented: today’s 30-year mortgage rates have increased over 120% in just over a year. Meanwhile, the US Treasury index has experienced a -18.51% drawdown from its peak in July 2021, according to the Bloomberg US Treasury Total Return Index.