Treasury Yield Curve Un-Inversion Signals Lowered Recession Worries, Not Imminent Rate Cuts
• The 2y/10y Treasury yield curve spread touched its least negative level in 2 months, indicating lowered recession fears • The curve is un-inverting due to expectations for quicker disinflation rather than recession prospects • The narrative that curve un-inversion signals impending rate cuts and recession doesn't apply currently • Oil price jumps from Middle East events could rekindle inflation, but yields still fell in bull-steepening trades • Traders don't expect enough 2023 rate cuts to signal recession fears; only 33% odds of 6 cuts by December