The 10-Year minus 3-Month Yield Curve With the 3-month Treasury yield falling, the 10-year minus 3-month yield-curve spread is steepening. Keep in mind that a positive spread facilitates borrowing short and lending long. Picture source: Bianco Research
10-Year/2-Year Treasury Yield Curve Around First Fed Rate Cuts The chart shows that the 10-Year/2-Year Treasury yield curve usually steepens around the first Fed rate cut. Picture source: Ned Davis Research
U.S. Recession Probabilities Over the Next Year from the Yield Curve Deutsche Bank has calculated the U.S. recession probabilities over the next year, using the slope of various yield curves. PCA (Principal Component Analysis) is used to estimate the effects of yield curve movements. Picture source: Deutsche Bank
The Yield Curve Leads Volatility by Three Years Is more volatility expected ahead? Yes, most likely. The CBOE Volatility Index or VIX usually follows the U.S. 10-year vs. 3-month Treasury spread (inverted) with a 3-year lag. See also “VIX is in a Transitory State.” Picture source: ClearBridge Investments
U.S. Yield Curve and Growth/Value P/E Ratio The chart below shows that the shape of yield curve explains nearly 50% of the variation in value vs. growth multiples. Actually, when the U.S. economy is sluggish, investors prefer growth stocks. Picture source: BlackRock, Inc.
