- The spread between 7- and 10-year Treasury yields has slimmed to just four basis points today, and with a seven-year auction on tap for next week, just the slightest bit of underperformance could have those yields trading above 10-years for the first time in nearly a decade.
- True, few follow the 7/10 spread, but what happens with that pair often foreshadows what's to come in the widely-observed and traded 5/10 and 2/10 spreads. "I watch the 7s/10s curve as the proverbial canary in a coal mine,” says BMO's head of U.S. rates strategy Ian Lyngen.
- According to Lyngen and team, other parts of the Treasury curve inverted about 6-28 days after the 7/10 gap went negative during the 1988 tightening cycle. It took even less time during 1994 and 2004.
- "If the Fed decides to move more this year, I think it’s inevitable that the curve inverts and I think it will be a mistake,” says Northern Trust (NASDAQ:NTRS)'s Colin Robertson.
- ETFs: IEF, PST, IEI, PLW, VGIT, UST, DTYS, GOVT, TYO, GSY, SCHR, STPP, FLAT, TBX, TYD, ITE, DTYL, EGF, TAPR, FTT, FIBR, HYDD, DFVL, TYNS, DFVS, USTB
- Now read: A Look At Some Cash Alternatives For Our Portfolios
Original article