Market Briefing: US Yield Curve - Yardeni Research

Market Briefing: US Yield Curve &

Credit Spreads

Yardeni Research, Inc.

December 12, 2022

Dr. Edward Yardeni

516-972-7683 eyardeni@

Debbie Johnson

480-664-1333 djohnson@

Mali Quintana

480-664-1333 aquintana@

Please visit our sites at blog.

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Table Of Contents Table Of Contents

December 12, 2022 / Market Briefing: US Yield Curve & Credit Spreads

Yardeni Research, Inc.



Figure 1.

600

US YIELD CURVE* & BUSINESS CYCLE (basis points, weekly)

400

600 Latest (-31)

400

200

200

0

12/9

0

-200

-200

-400

-400

-600

-600



-800

-800

62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26

* 10-year US Treasury yield less federal funds rate. Note: Shaded areas are recessions according to the National Bureau of Economic Research. Source: Federal Reserve Board.

Figure 2.

600

US YIELD CURVE* & STOCK MARKET CYCLE (basis points, weekly)

400

600 Latest (-31)

400

200

200

0

0

12/9

-200

-200

-400

-400

-600

-600



-800

-800

62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26

* 10-year US Treasury yield less federal funds rate. Note: Shaded red areas are S&P 500 bear market declines of 20% or more. Yellow areas are bull markets. Source: Federal Reserve Board.

Page 1 / December 12, 2022 / Market Briefing: US Yield Curve & Credit Spreads

Yardeni Research, Inc.



Figure 3.

500

500

COMPONENTS OF LEADING ECONOMIC INDICATORS

400

400

300

300

200

200

100

Oct

100

0

0



-100

-100

-200

-200

-300

-300

Interest Rate Spread*

-400

(basis points, nsa)

-400

-500

-500

-600

-600

-700

-700

54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26

* 10-year Treasury bond less federal funds rate. Note: Shaded areas are recessions according to the National Bureau of Economic Research. Source: The Conference Board.

Figure 4.

130

120 LEADING & COINCIDENT ECONOMIC INDICATORS

110

(2016=100, sa, ratio scale)

100

90

80

70

60

50

130 120 Oct 110 100 90 80 70

60

50

40

40

Economic Indicators

Leading

Coincident

30

30

9

10

16 9

18

12

22

2



20

20

62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26

Note: Shaded areas are recessions according to the National Bureau of Economic Research. Numbers above time line reflect number of months from peak of leading indicators to peak of business cycle. Source: The Conference Board.

Page 2 / December 12, 2022 / Market Briefing: US Yield Curve & Credit Spreads

Yardeni Research, Inc.



Figure 5.

450

US TREASURY YIELD CURVE SPREAD: 10-YEAR MINUS-2-YEAR (basis points, weekly)

350

450 Latest (-81)

350

250

250

150

150

50

50

-50

-50

12/9

-150

-150



-250

-250

76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26

Note: Shaded areas are recessions according to the National Bureau of Economic Research. Source: Federal Reserve Board.

Figure 6.

600

600

US YIELD CURVE & BUSINESS CYCLE (basis points, weekly)

400

400

200

200

0

0

12/9

12/9

-200

Treasury Yield Curve Spread

-200

10-Year Minus

Federal Funds Rate (-31)

-400

10-Year Minus 2-Year (-81)

-400

-600

-600



-800

-800

62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26

Note: Shaded areas are recessions according to the National Bureau of Economic Research. Source: Federal Reserve Board.

Page 3 / December 12, 2022 / Market Briefing: US Yield Curve & Credit Spreads

Yardeni Research, Inc.



Figure 7.

26

26

24

FEDERAL FUNDS RATE & MONETARY POLICY CYCLE

24

22

(percent, weekly)

22

20

20

18

18

16

16

14

14

12

12

10

10

8

8

6

6

4

12/7 4

2

2

0

0



-2

-2

60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26

Note: Blue shaded areas are periods of monetary easing between cyclical peaks and troughs in the federal funds rate. Red shaded areas are monetary tightening periods. Source: Federal Reserve Board.

Figure 8.

800

800

700 US YIELD CURVE* & MONETARY POLICY CYCLE

700

(basis points, weekly)

600

600

500

500

400

400

300

300

200

200

100

100

0

12/9

0

-100

-100

-200

-200

-300

-300

-400

-400

-500

-500

-600

-600

-700

-700



-800

-800

62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26

* 10-year US Treasury yield less federal funds rate. Note: Blue shaded areas are periods of monetary easing between cyclical peaks and troughs in the federal funds rate. Red shaded areas are monetary tightening periods Source: Federal Reserve Board.

Page 4 / December 12, 2022 / Market Briefing: US Yield Curve & Credit Spreads

Yardeni Research, Inc.



Figure 9.

30

30

FEDERAL FUNDS RATE & FINANCIAL CRISES (percent, weekly)

1997 Pacific

Rim

25

25

1984 Continental

Illinois

1990 1994 S&L Mexican Crisis Peso

2001

2007

9/11 Subprime

Attacks Meltdown

20

20

1970 1974

Penn Franklin

15

Central National

1987 Black Monday

2000 Tech Bubble

2008

Lehman & AIG

2020 Covid

15



1998

10

Russia

10

& LTCM

5

1980 Silver

Bubble

5 12/7

0

1982

0

Drysdale

& Mexico

-5

-5

60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26

Note: Blue shaded areas are periods of monetary easing between cyclical peaks and troughs in the federal funds rate. Red shaded areas are monetary tightening periods. Source: Federal Reserve Board.

Figure 10.

800

800

700 US YIELD CURVE* & FINANCIAL CRISES (basis points, weekly)

1997 Pacific

Rim

700

600

2001

600

500

1970 1974 Penn Franklin

1980 1984 Silver Continental

1990 1994 S&L Mexican

9/11 Attacks

2007 Subprime

500

400

Central National Bubble Illinois

Crisis Peso

2000

Meltdown

400

300

Tech Bubble

300

200

200

100

100

0

12/9

0

-100

-100

-200

-200

1987

1998

2008

2020

-300

Black

Russia

Lehman

Covid

-300

Monday

& LTCM

& AIG

-400

-400

-500

-500

1982

-600

Drysdale

-600

& Mexico

-700

-700



-800

-800

62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26

* 10-year US Treasury yield less federal funds rate. Note: Blue shaded areas are periods of monetary easing between cyclical peaks and troughs in the federal funds rate. Red shaded areas are monetary tightening periods Source: Federal Reserve Board.

Page 5 / December 12, 2022 / Market Briefing: US Yield Curve & Credit Spreads

Yardeni Research, Inc.



Figure 11.

350

US TREASURY YIELD CURVE SPREAD: 10-YEAR MINUS-2-YEAR (basis points, weekly)

250

350 Latest (-81)

250

150

150

50

50

-50

-50

12/9

-150

-150



-250

-250

76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26

Note: Blue shaded areas are periods of monetary easing between cyclical peaks and troughs in the federal funds rate. Red shaded areas are monetary tightening periods. Source: Haver Analytics.

Figure 12.

20

20

2-YEAR TREASURY YIELD & FEDERAL FUNDS RATE TARGET (percent, weekly)

15

15

2-Year Treasury Yield (4.33) Federal Funds Rate Target (3.88)

10

10

5

5

12/9 12/7



0

0

76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

Note: Blue shaded areas are periods of monetary easing between cyclical peaks and troughs in the federal funds rate. Red shaded areas are monetary tightening periods. Source: Federal Reserve Board.

Page 6 / December 12, 2022 / Market Briefing: US Yield Curve & Credit Spreads

Yardeni Research, Inc.



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