A closely watched section of the Treasury yield curve on Friday turned negative for the first time since the crisis more than a decade ago, underscoring concern about a possible economic slump and the prospect that the Federal Reserve will have to cut interest rates.
The gap between the 3-month and 10-year yields vanished on Friday as a surge of buying pushed long-end rates sharply lower. Inversion is widely considered a reliable harbinger of recession in the U.S. The 10-year slipped to as low as 2.439 percent.
U.S. central bank policy makers on Wednesday lowered both their growth projections and their interest rate outlook, with the majority of officials now envisaging no hikes this year. That’s down from a median call of two at their December meeting.
Traders took that dovish shift as their cue to dig into positions for a Fed easing cycle, pricing in a cut by the end of 2020 and a one-in-two chance of a reduction as soon as this year.