US10Y - US02Y : Lesson from 2008Not long ago, it was inverted by more than 100bps. Today, the inversion is about 40bps. As we all know, once it emerges from inversion, i.e. un-inverted, that is when we start counting to the next RECESSION. On average, it is 4 months. You can see it in the above chart. FED will soon cut rates.
Once un-inversion occurs, market will again do an adjustment/re-pricing exercise to all assets.
As you may already know now, the FED says there is NO RATE CUT this year. In fact, there is a possibility that there is one more +25bps to go. But you should know the market reaction by NOW. The market is signaling that the FED is done with rate hikes. You can see it in the Fed Fund Futures. In fact, market is now expecting a rate CUT in the next FOMC!!! and with more to come.
So now we wait for the un-inversion to occur. I think it is coming soon.
Also note that DXY is much higher than compared to 2008, meaning there is a BIG possibility that there is much more to FALL???
And possibility that DXY will continue to FALL until when the market sense that the FED is done with rate hikes. Once the EFFR touches 0.00%, that is when the DXY will start rising again.
Good luck.
P/S : Do not just believe what I say. Use your common sense.