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  • US Treasury yield curve hit the flattest level since June 2007.  
  • The spread between the 10- and two-year yields dropped to 0.028 basis points.  

US treasury yield curve hits its flattest level in more than a decade on Tuesday, indicating increased recession fears.

The spread between the US 10-year and two-year treasury yields declined to 0.028 basis points, the narrowest since June 2007, according to Refinitiv data.

The spread narrowed even though the yields rose on the decision by the US President Trump to delay imposing a 10 % tariff on Chinese goods.

The US 10-year yield rose by six basis points to 1.70% on Tuesday and the two-year yield added more than ten basis points to reach 1.677%.

An upbeat US inflation data may have also played a role in lifting Treasury yields. The Labor Department said the U.S. consumer price index climbed 0.3% last month, lifted by gains in the cost of energy products and a range of other goods. Excluding the volatile food and energy components, the CPI gained 0.3% after rising by the same margin in June, according to a Reuters report.

Looking forward, the spread may invert, triggering if markets remain risk averse, boosting the demand for the 10-year treasury note. Curv inversion, a recession indicator, may further add to the risk-off tone in the markets.