Mar 22, 2019
The 3-month/10-year spread inverted for the first time since 2007 -- a classic recession signal. The belly of the curve (2y-5y) dipped below the short end while the long end held. Historically you had to go back to the late 1970s to see this shape, but between 2019 and 2023 we cycled through every major yield curve regime in just four years.
Key Spreads
| Spread | Custom |
|---|
Implied Forward Rates (Custom Curve)
1y Forward, 1y Out
--
1-year rate in 1 year
1y Forward, 2y Out
--
1-year rate in 2 years
5y Forward, 5y Out
--
5-year rate in 5 years
(1 + rlong)n = (1 + rshort)m × (1 + f)n−m
The four-year gauntlet (2019--2023):
Flat/inverted (Mar 2019) signaling recession. Normal but low (Jan 2020) in the calm before the storm.
Ultra-steep from zero (May 2020) as the Fed floored rates during COVID. Rising with a bear flattener
(Apr 2022) as the most aggressive tightening cycle in 40 years began. Deeply inverted (Apr 2023) with
the front end above 5% and the 10-year below 3.5%. Previously you'd have needed data going back to
the Volcker era to illustrate all of these regimes. We got them all in a single presidential term.