Many on Wall Street see the U.S. Treasury yield curve as flashing a warning sign, and are worried a recession could be in store, after bond investors pushed up short-term rates to the point where yields on the two-year Treasury were higher than for the 10-year Treasury.
Such a phenomenon, called a "yield curve inversion," is a key metric investors watch, as bond yields impact other asset prices, feed through to banks' returns and have been an indicator of how the economy will fare. And aside from signals for the economy, the shape of the yield curve also has ramifications for consumers and business.
On Tuesday, one of the most closely watched parts of the curve, the two-year to 10-year curve, briefly inverted, after weeks of sharp moves in the U.S. Treasury market — where investors have sold off Treasurys anticipating aggressive interest rate hikes from the U.S. Federal Reserve, which is fighting surging inflation.