Moves in the Treasury market brought a closely watched recession indicator close to undoing itself as traders prepare for the Federal Reserve to loosen US monetary policy.
The 10-year Treasury note sold off, sending yields higher on Wednesday after an auction for the debt instrument indicated weak demand.
Bond prices fell across most maturities on the day, though the two-year note was an exception.
The so-called yield curve tracks the difference between two- and 10-year Treasury yields, and for the past two years has been in “inversion” territory, meaning short-term rates exceed longer-term ones. Wednesday’s market moves the yield curve to less than 0.02 percentage points from exiting inversion territory.
Some analysts view a yield curve inversion as a sign of an incoming recession, and argue that a downturn sometimes comes after it returns to normal.
In equities, the S&P 500 closed 0.8 per cent lower. The Nasdaq Composite shed 0.7 per cent as four Magnificent Seven stocks declined.
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