Yield curve may be signaling a slowdown ahead

Sources: Bloomberg, and Wells Fargo Investment Institute. Monthly data from January 1, 1978 to September 30, 2022. For illustrative purposes only. Ten-Year Treasury Constant Maturity and the One-Year Constant Maturity Indexes are published by the Federal Reserve Board and are based on the average yield of a range of Treasury securities, all adjusted to the equivalent of a 10-year maturity and the equivalent of a one-year maturity. Shaded area represents time frame of a U.S. economic recession. Yields represent past performance and fluctuate with market conditions. Current yields may be higher or lower than those quoted above. Past performance is no guarantee of future results. 100 basis points equal 1%. Although Treasuries are considered free from credit risk they are subject to other types of risks. These risks include interest rate risk, which may cause the underlying value of the bond to fluctuate.

Key Takeaways

  • Yields moved higher across the yield curve in the first half of 2022; however, the curve has been inverted since July as short-term rates climbed at a faster pace than intermediate- and long-term rates.
  • An inverted yield curve has historically pointed to a slowdown in economic growth.