Note: We’ve updated this commentary with data through the August 25th market close.
The yield on the 10-year note ended August 25, 2023 at 4.25%, the 2-year note ended at 5.03%, and the 30-year at 4.30%.
Here is a table showing the yields’ highs and lows and the FFR since 2007.
The charts below show the daily performance of several Treasury bonds since the pre-recession days of equity market peaks in 2007.
The next chart is an overlay of all 6 charts above along with the Fed funds rate (FFR) since 2007.
A Long-Term Look at the 10-Year Treasury Yield
Here is a long look of the 10-year yield with a start date of 1965, well before the 1973 oil embargo that triggered the era of “stagflation” (economic stagnation with inflation).
Here’s the latest 10-2 spread. Typically, the spread goes negative for a period and then out of the red prior to recessions. The lead time for recessions is quite a range – after going negative, recessions have begun anywhere from 16 to 62 weeks later. We also can see a false positive in 1998 where the spread went negative for a short period. For the 2009 recession, the spread went negative a couple of different times before rising.
If we use the first negative spread date as our starting point, the average number of weeks leading up to a recession is 37, or about nine months. If we use the last positive spread date after being negative before a recession, the average is 17 weeks, or 4.25 months and the median is 14 weeks, or 3.5 months.
As of August 25th, the 10-2 spread has been negative for 288 days (~41 weeks or ~9.5 months).
The 30-Year Fixed Rate Mortgage
The latest Freddie Mac Weekly Primary Mortgage Market Survey put the 30-year fixed rate at 7.23%. Here is a long look back, courtesy of a FRED graph, of the 30-year fixed-rate mortgage average, which began in April of 1971.
Now let’s see the 10-year against the S&P 500 with some notes on Federal Reserve intervention. Fed policy has been a major influence on market behavior.
For a long-term view of weekly Treasury yields, also focusing on the 10-year, see our latest Treasury Yields in Perspective update.
For more news, information, and analysis, visit the Fixed Income Channel.
This article was originally written by Doug Short. From 2016-2022, it was improved upon and updated by Jill Mislinski. Starting in January 2023, AP Charts pages will be maintained by Jennifer Nash at VettaFi | Advisor Perspectives