The history of almost three decades of USA yield and interest rates, as shown above, highlight a risk that when interest rates invert, particularly when 3mo yields/rates exceed 10 yr yields, a downturn often follows.  While several in the markets have expressed concerns that the USA yield curves are flattening, they currently do not appear to be close to inverting.

Another viewpoint on yield curves is expressed as the margins or differentials between long-duration and short-term rates.  When (parts of) yield curves invert, the short term rates exceed the long term rates and the differentials (long less short) become negative.

It is interesting to note that for the 2008-09 financial crisis, the USA 10yr-2yr  yield differential fell below zero in early 2006, which was at the same time that USA Residential Construction Spending yr-on-yr growth rates peaked (January 2006) and turned downward, well ahead of the wider recognition of the financial crisis in Sept-Oct 2008.

We consider that the USA indicators are not currently foreshadowing a comparable risk of downturn, though draw attention to historical data signals that bear watching closely.

As has been said before, history does not repeat itself, but it often rhymes.