2-10 Yield Curve Inversion: How Low Will It Go?
As economists and portfolio managers know, the slope of the 2-10 yield curve1 in Canada inverted in mid-July and has continued to fall to levels not observed in the past 15 years or longer. This large flattening of the yield curve has occurred in many different segments, from 1-2 to 2-10 with only (so far) the 5-10 and segments incorporating the longest of bond maturities2 at positive levels on the final trading day of July. Many of these segments of the yield curve have now reached levels flatter (more inverted, usually) than observed in the approach to the 2008 financial crisis, the intervening years of low yields and slowly recovering economies in both Europe and North America, and the 2020 market panic at the onset of the global COVID-19 pandemic.
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