We haven’t written about government bond yields recently but there has been a lot of action in the bond market. Government bond yields have been falling globally which are an indicator that markets are expecting stagnant or falling interest rates. 10-year government bonds are the most tracked and traded and yields have mostly fallen compared to a year ago.
The U.S. 10-year Treasury bond yield is now at 2.65%, down 19 bps from a year ago.
The U.S. 10-year Treasury constant maturity yield minus the 2-year Treasury constant maturity yield spread has been a good indicator of past recessions. Yield curve inversion which happens when the spread turns negative and has preceded the last seven straight recessions. The 10-year Treasury constant maturity yield minus the 2-year Treasury constant maturity yield is the lowest since the last recession at only 10 bps.