US Treasury Yield Spread Uninverts Without Recession

The 10-year and three-month Treasury yield spread has uninverted without a subsequent economic downturn, breaking a 60-year historical pattern where a negative spread preceded every recession. The inversion began in late 2022 and reached a record low of nearly -200 basis points before the current normalization occurred.

This shift is characterized as a bear steepener, driven by Treasury bond supply and U.S. inflation rates that remained between 3% and 4% for most of 2026. Despite these factors and the risk of market corrections, stock prices remain supported by positive GDP growth and strong corporate earnings.

Market stability now depends on broader economic factors. Analysts suggest that a resolution to the war in Iran is necessary to lower inflation and prevent the Federal Reserve System from continuing a prolonged interest rate hiking cycle.