Further fueling the market volatility, U.S. government bond yields slipped even further as investors worried about U.S. growth. Yields on benchmark 10-year Treasury notes dipped to 2.89% mid-Tuesday, marking a further narrowing of the spread between U.S. 10-year and two-year Treasuries to the smallest gap in over a decade, with some concerned about a potential inverted yield curve, which has typically preceded recessions.
“While interest rate hikes have sent short-dated yields higher, tepid inflation and slowing economic growth expectations have kept longer-dated yields pinned down,” Michael O’Rourke, chief market strategist at JonesTrading, told Reuters. “It’s a signal we’re getting closer to (full) inversion but we’re still a fair distance from it. It’s something to note … something to be aware of but there’re other facts in play.”
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CORRECTION: UVXY indexing methodology.