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The yield spread between 10y-3m U.S. treasury securites is still negative.
happycapital (86)modin H4LAB Research • 4 hours ago (edited)
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Source: FRED
Take a look at the chart. The right before recessions occured, the yield spread between 10y-3m U.S. treasury securites has revovered from negative to positive.
In this cycle, it's still negative. So, it'd be difficult to occur a recession right now. I think if the Fed starts to cut the interest rate this September, the yield spread(10y-3m) will be rapidly recovered.
Because, if the interest rate starts decreasing, existing long-term bond prices will increase due to increasing demand from highest coupon rates.
On the other hand, new issued long-term bonds have low coupon rates. So, they will have less demands before, which means the coupon rates of long-term bonds may not much fall than expected.
Short-term bonds tend to similarly follow the interest rate. So, that's the reason why the yield spread(10y-3m) has recovered after the interest rate cuts.
But, no one knows what will be happening. I just hope that there won't be a recession before 2026.