10-2 Yield Curve Approaches Parity

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We made new lows with the spread today. German and GBP 10 Year Futures major gaps. TLT IEF SPY GLD DXY

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Plotted in red: SPX.

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5-2 Year spread went negative Tuesday.

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Something interesting to note on this idea that I keep coming back to even after the March 2020 selloff, this is the first time I have observed a 10-2 yield spread recovery DURING a stock market boom and recession.

Previous 10-2 recoveries were coupled with stock market selloffs and then recoveries. This was true of the DOTCOM crash and the 2008 GFC crash. Because of the direct lending of the Treasury, I am not sure if things will ever be the same again.

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One update upon a second look, the only other time I can see similar action was July 1998. Back then was one of (if not the first) off cycle FED interventions because of a ‘currency crisis’.

The 10-2 spread dipped into negative territory momentarily, and then jumped back up. However the spread recovery is no where near as fierce as post coronavirus, or 2008, or 2001.

After July 1998 the Nasdaq increases 350% to March 2000. Sound familiar?