U.S. yield curve signals economic risks
American bond market expectations indicate that interest rate hikes by the Federal Reserve could slow down the U.S. economy. The spread between the 10-year and 2-year Treasury bonds has decreased to its lowest level since early 2025, reflecting the possibility that the 10-year bond yield may fall below the short-term yields. This is a leading indicator traditionally associated with recessions that occurred in the 1980s and the 1960s. Investors are anticipating a significant interest rate increase to curb inflation, with further hikes potentially continuing after the initial increase three years ago.
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