This generally isn’t great for markets.
This generally isn’t great for markets: Tom Essaye Quoted in Blockworks
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The 10-year Treasury constant maturity minus the 2-year (aka 10s-2s), currently around -0.26, is moving in a positive direction, Sevens Report founder Tom Essaye said. This generally isn’t great for markets.
“The rise in 10s-2s is reinforcing my concern that investors are underappreciating the economic risks facing this market in the coming quarters and instead are viewing the world through positively-tinted glasses,” Essaye said. “I very much hope they are right.”
10s-2s go positive when 2-year Treasurys fall quickly because the market expects aggressive rate cuts from the Fed, which is what’s happening now. Markets love this. But, the Fed lowers rates when they get concerned about slowing economic growth, which, Essaye says, the market is currently underestimating.
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