Evercore ISI noted that the yield curve between the U.S. 2-year Treasury bond yield (US2Y) and the U.S. 10-year Treasury bond yield (US10Y) has gone from inverted to non-inverted in the past two times, followed by significant market sell-offs. Within 12-24 months.
Earlier this week, the long-term inverted 2s/10s curve briefly showed no inversion.
“After 2 years of underground shenanigans, 2/10 has exploded and is just 8 basis points away from freedom. While “no bells are ringing at the top,” the last two times this has happened, the S&P has rallied in the ensuing 12- Down -43% and -53% respectively in 24 months. Not a timing tool, but still bearish,” Evercore ISI said in an investor note on Friday.
Back on Monday, the 2010 yield curve briefly normalized for the first time in more than two years, but Wall Street is still waiting for the first day the curve actually closes at a non-inverted level.
As of Friday, the rate on the shorter 2-year note fell 2 basis points to 4.02%, while the rate on the longer 10-year note fell 6 basis points to 3.93%. Furthermore, the yield curve between the two instruments currently stands at -8 basis points.
See the long-term chart of the 2s/10s yield curve below, which highlights the inversion that began on July 5, 2022.
For market participants who follow Treasury and bond movements closely, they may further analyze Treasury-focused exchange-traded funds and other fixed-income ETFs as proxy investments. See some popular listed funds below:
Treasury Bond ETFs: (NASDAQ: TLT), (TLH), (IEF), (IEI), (SHY), (SGOV), (SCHO) and (BIL).
Bond ETFs: (NYSE:AGG), (BND), (VCIT), (MUB), (MBB), (JNK), (LQD), (HYG) and (TIP).
Additionally, check out how other yields have traded across the yield curve here.
