Long-term bond yield reflects inflation. Short-term bond yields are tools used to predict Fed's interest rate policy. Spread between the two represents four cycles of an economy.
Short--term yield rises as interest rates rise. Spread narrows.
2. Slow growth
Central bank raises interest rates faster and short-term yield exceeds long-term yield. Spread turns negative.
High interest rates lead to more defaults. Inflation caps consumption. Central bank lowers interest rate to stimulate the economy and short-term yield falls. Spread widens.
Central bank continues easing. Spread remains wide and yield curve remains steep.
US 10-Year Bond Yield (L)2021-03-051.58%
US 2-Year Bond Yield (L)2021-03-050.14%
US 10-year Bond Yield - 2-year Bond Yield (R)2021-03-051.42%