The US Treasury yield curve may be normalising – but it is still inverted

WALL Street stocks have come under severe pressure in recent weeks, thanks to spiking bond yields, with the 10-year Treasury on Tuesday (Oct 3) yielding 4.8 per cent, the highest in 16 years.

Although equity investors are fretting, from one point of view this is a welcome signal – the 10-year yield was 4.1 per cent just a month ago, versus the six-month yield at 5.6 per cent.

The large gap of 150 basis points between the two, plus the fact that the yield curve was inverted with short-term bonds yielding more than those with longer tenures, led many to maintain their forecast that the US economy is headed for a recession.