One of the bond market’s most widely followed recession indicators flashed more deeply worrisome signals on Tuesday. The spread on 2- and 10-year Treasury yields shrank to minus 83 basis points and as little as minus 86 basis points at one point — and was poised to end the New York session at its most inverted level since Oct. 2, 1981, when it reached minus 96.8 basis points. Investors are weighing a string of strong U.S. economic data, which is complicating the Fed’s inflation-fighting campaign and makes it more likely the central bank will continue to hike rates in 2023 despite the risks of a recession.
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