12/19/2022 - Yra Harris – ‘Twas the Week Before Christmas

“For the US the yield curve — notably the 2/10 — going into 2023 will be of interest as concerns are arising everyday about the growing pile of US debt and the rapidly rising financing costs. It twists my brain to figure why investors would desire 10-year notes that yield far less than two-year notes. Yes, if recession sets in, 10s have been a safe haven and rallied into a slowing economy and falling inflation levels. BUT if the economy slow and the FED holds at 4.5%, won’t the budget deficit increase creating even greater financing problems for the US deficit? Remember, not all economic outcomes are the same. The 2/10 US curve had a wide range last week but after inverting by more than 80 basis points it closed close to the week’s lows. That’s something to watch as the budget battles grow.”

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