The spread between three-month and 10-year Treasury yields — a relationship known as the yield curve — on Monday inverted to its widest level since 2007.
At its most extended point, the spread reached -32 basis points. That’s a worrisome sign for economists and traders alike, considering such an inversion has preceded every US recession of the past 50 years. And while the relationship has been in negative territory for months now, it’s the severity of Monday’s shift — and the reasons for it — that have traders on high alert.
This latest escalation was spurred by the Chinese central bank’s decision to let the yuan slide below a key threshold versus the US dollar. China also said it would cease importing US agricultural products.