2-Year US Treasury Yield Emerges as Top Indicator for Predicting Recessions: What Does It Suggest?
'Bond King' Jeff Gundlach has argued that we should do away with the Federal Reserve and replace the Fed funds rate with the 2-year US Treasury (2yr UST) yield given its track record for where the Fed funds rate should, or is likely to, move.
Typically, the 2yr UST yield dip below the upper bound of the Fed funds rate signals an incoming pause or lowering of rates, possibly followed by recession, as we saw during the last five tightening cycles.
Analyst finds that Since the 1981-1982 recession, every time the 2yr UST yield dipped below the Fed funds rate by 50 bps or more, the Fed cut interest rates within 1 year; Meanwhile, recession happened.
"Every single episode of a local peak in UST 2yr yield was followed by some risk-negative event over the past 40 years." Bank of America analyst says.
Source: Seeking Alpha, Bank of America
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love apple : What tools can I use to compare these two interest rates myself? Thank you!
jimmy the trader : Thanks . Good piece
webguybob : Interesting. So, how long after these indicators emerge does a recession generally hit?
104371487 On Paris : Thank you good piece