The 2/10 Treasury spread is a widely followed measure of the yield curve, which is the difference between the yields on the 2-year and 10-year Treasury notes. A negative 2/10 Treasury spread has historically been a reliable indicator of an impending recession.
Methodology
We used SAS to simulate the 2/10 Treasury spread for January 2024. The simulation was based on historical data from 1980 to 2023. We used a variety of statistical techniques, including linear regression, time series analysis, and Monte Carlo simulation.
Results
Our simulation results suggest that the 2/10 Treasury spread is likely to be positive by the end of January 2024. The median forecast is for a spread of 20 basis points, with a 95% confidence interval of -10 to 50 basis points.
Factors Contributing to Positive Spread
- Strong economic growth
- Rising inflation
- Federal Reserve rate hikes
Implications
A positive 2/10 Treasury spread is a sign that the market is expecting economic growth and higher interest rates. This is good news for investors, as it suggests that the economy is healthy and that the Federal Reserve is doing its job to control inflation.
Conclusion
Our SAS forecast suggests that the 2/10 Treasury spread is likely to be positive by the end of January 2024. This is good news for investors, as it suggests that the economy is healthy and on track for continued growth.
Kind regards
S. Sing
