Inversion Alert! Treasury Slope Plummeting Towards 0 BPS

By Anthony B. Sanders

Corporate Debt To GDP May Be At Credit Cycle High

One of the effects of The Federal Reserve’s zero interest policy (ZIRP) was the massive expansion of both consumer and corporate debt. The US may be at a credit cycle peak (Corporate Debt-to-GDP).

corporate debt to gdp 2

Which brings me to the UST 10Y-2Y slope, plummeting towards inversion (now at 24.5 BPS). The last time we saw the 10Y-2Y slope so flat was in early August 2007, 4 months before The Great Recession began.

curvesandstuff

You will notice that the glacial unwinding of The Fed’s balance sheet has been uneventful for the 10Y Treasury yield, but the rapidly rising 2Y Treasury yield (that corresponds to The Fed’s rising target rate) is pushing the Treasury curve to inversion.

“INVERSION!!!!!”

inversion

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