Recession or Soft Landing?

Recession or Soft Landing?

September 5, 2024

On August 28th, 2024, the 10-year Treasury yield minus the 2-year Treasury yield returned to normal, meaning the yield curve was no longer inverted. An inverted yield curve, where short-term rates are higher than long-term rates, has historically been a predictor of recessions.

We can see this in the graph below showing 30+ years of data for the 10Y-2Y Treasury yield spread. Soon after the spread corrects, a recession follows.

Graph

Source

If history is to repeat itself, the countdown for the final stage of entering a recession has already started.