- A classic recession indicator is flashing signs that the long-awaited downturn is about to start.
- BofA strategists pointed to two points in the yield curve that have inverted, moves typically followed by a recession.
- “Yield curve says recession starts now; markets await confirmation from labor market,” the analysts wrote.
The bond market’s notorious recession indicator has flashed signs of an incoming downturn for months – and history says it’s sending a warning to markets that a downturn could kick of this quarter, according to Bank of America strategists.
Strategists pointed to the inverted Treasury yield curves – namely, the spread between the 2-year and 10-year yields, and the spread between the 3-month and 10-year yields. Short-term yields surpassing long-term yields are a highly-watched signal of an incoming recession, with the inverted 2-10 spread correctly predicting the recessions of 1990, 2001, and 2008.
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