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The U.S. Treasury Yield Curve inverted Tuesday, July 5, while the SPDR Dow Jones Industrial Average ETF Trust (NYSE:DIA) fell 129.44 points.
It's another sign that the economy is heading into a recession more and more each day.
What Happened: When the yield curve inverts, the two-year Treasury Bond Yield is higher than the 10-Year Treasury Bond Yield.
At midday today, the two-year yield was 2.792% while the 10-year yield was below that at 2.789%.
In addition to representing investor returns on a treasury bond, the yield curve serves a separate purpose for economists. If the yield curve inverts, it sends shockwaves through the U.S. markets the nation's economy is going to experience or is experiencing a recession.
“I wouldn’t say it’s a direct indication that a recession is a near-term risk," Ian Lyngen, head of U.S. rates strategy at the Bank of Montreal (NYSE:FNGU), said. "Rather it’s consistent with increased concern about recession."
Also Read: As US Economy Weathers Inflation, GDP Growth Turns Negative: Are We Headed For A Recession?
The yield curve is related to the economic strength of a nation because of the way it impacts the banks. It represents the bank’s cost of money versus what it will make by lending money to the public. If the yield curve inverts then banks will stop lending money as they won’t be able to profit off mortgages or other loans.
Photo Courtesy of bradhoc on flickr
