Market professionals track the spread between the longer-term Treasury yield and the shorter-term yield, with the former typically being higher. Although 2 Year Treasury Yield Wednesday morning was up 2.8446%, up from 10 years.
That so-called reversal, especially if sustained, is often interpreted as a warning sign that the economy may be weakening and that a recession may be on the horizon. The curve of 10 years from 2 years first reversed on 31st March, Then briefly in June.
Markets have become increasingly concerned about the prospect of a recession in recent weeks as economic data weakened, while Federal Reserve Chairman Jerome Powell has committed to aggressive action to fight rising inflation. Should the central bank raise interest rates too quickly, the slowdown in the economy could then turn into a recession.
Investors await the minutes of the Federal Open Market Committee’s latest monetary policy meeting, which will be published at 2 p.m. on Wednesday, to show signs of tightening policy.
Several notable data points are also expected Wednesday morning, including June’s ISM non-manufacturing PMI (Purchasing Managers Index) readings and May’s JOLT job openings, both of which are due at 10 a.m.
An auction of $30 billion in 119-day Treasury bills will be held on Wednesday.