Morning Notes — Technical Level

The nominal 2/10 yield curve is very close to inverting, which should drive more reports of recession signaling and warnings for equity investors.  We covered timing, performance following curve inversion and the significance of real yields in yesterday’s edition, but the last piece deserves repeating.  Real yields are calculated by subtracting inflation expectations from nominal yields. The entire curve structure of real yields is positively sloped with a current 2/10 real yield spread of +175bps. The last recession signal from an inverted 2/10 nominal yield curve occurred in early 2006, when the real yield curve also inverted.