Historic Inversion: Deepest Spread between 2- and 10-year Treasuries since '81

The spread between the 2-year and 10-year U.S. Treasury note yields reached its deepest inversion since 1981, reflecting concerns that an extended Federal Reserve rate hiking cycle could lead to a recession. Market participants have priced in the possibility of additional rate hikes this year to control inflation, but futures markets now project rate cuts starting in January. A yield curve inversion, where shorter-dated Treasuries have higher yields than longer-dated securities, has historically preceded recessions. The spread between 2 and 10-year Treasuries has been inverted since July 2018.