Good morning and welcome back to The Economic Wagon — your daily roundup of clear, digestible economic insights to keep you informed and ready. Today we’re diving into a key signal of the economy’s direction: the yield curve and what its recent moves suggest.
🧭 The Yield Curve: What’s Going On?
In the bond market, the shape of the yield curve — especially the spread between long-term and short-term interest rates — is one of the most talked-about indicators for potential economic shifts. When short-term rates rise above long-term rates (an inversion), history shows that recessions often follow. (Cleveland Federal Reserve)
Here’s the latest:
As of mid-November 2025, the spread between the 10-year and 2-year U.S. Treasury yields is about 0.55 percentage points (i.e., 10-year yield is about 0.55% higher than the 2-year). (FRED)
Earlier, the curve had been inverted — but it’s now back into positive territory (i.e., “un-inverted”). (YCharts)
But while it’s positive, the slope (how much higher long-term yields are than short-term yields) remains quite flat compared to historical norms. (WisdomTree)
🔍 Why This Matters (Beyond the Basic “It Might Signal Recession”)
Here are three specific implications worth tracking:
Growth expectations are improving
A normal (upward sloping) yield curve suggests investors expect the economy to keep growing — short-term risk is lower relative to long-term. The recent return to positive territory suggests the market may be moving away from immediate recession fears.Still some caution baked in
The slope of only ~0.55% is modest. Historically, stronger positive spreads (1% or more) were more common in stable growth periods. Their absence suggests investors may see growth continuing, but not booming.Policy & financing angles
The curve’s prior inversion tied to tight policy by the Federal Reserve (higher short-term rates) and investor worries about economic slowdown. (JPMorgan)
A flatter spread can mean borrowing costs for longer-term projects remain high, which may weigh on investment and big capital decisions (in infrastructure, business expansion, etc.).
For everyday consumers: Mortgage and car-loan rates often follow long-term yields, so a flattening or steepening has real-life implications.
✅ What to Keep an Eye On
Here are some variables you might track to see where this is headed:
Spread movements: If the 10-year minus 2-year spread climbs above 1% (i.e., long-term yields pull further ahead), that could signal growing confidence. If it shrinks toward 0% or becomes negative again — that historically raised red flags.
Fed policy decisions: If the Fed cuts short-term rates significantly, yet long-term yields don’t fall much, the curve could steepen (higher spread). That might mean the market expects future growth or inflation.
Economic data & inflation: If inflation picks up or growth slows substantially, long-term yields or short-term yields may shift, affecting the curve shape.
Debt issuance & fiscal policy: The U.S. government issues a lot of long-term debt. If markets worry about debt levels/fiscal policy, long-term yields might rise even without big growth expectations — flattening the curve.
🧠 Why You Might Want to Read This Daily
Because these are the subtle shifts that signal change well before big headlines. The yield curve doesn’t guarantee a recession or boom, but it often alerts markets and policymakers that direction is shifting. By watching it closely:
You get early hints about whether growth is likely to accelerate or stall.
You can anticipate impacts on borrowing cost, investment flows, and interest-rate sensitive sectors (housing, autos, business capital).
You develop a better feel for how confident investors are about the future.
📝 Quick Recap
The yield curve (10-yr vs 2-yr) is now positive (~0.55%) — good sign, but slope remains modest.
The curve’s prior inversion made many nervous about recession; the “un-inversion” suggests some of that fear may be easing.
Still, flattening means markets are not expecting booming growth either — more of a “steady but cautious” outlook.
Watch for movements in the spread, Fed policy, inflation data, and fiscal developments to sense where things may go next.
Thanks for reading this morning’s issue of The Economic Wagon. Keep your eyes on that curve — because sometimes the biggest stories are happening before they show up on the front page.
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That’s All For Today
I hope you enjoyed today’s issue of The Wealth Wagon. If you have any questions regarding today’s issue or future issues feel free to reply to this email and we will get back to you as soon as possible. Come back tomorrow for another great post. I hope to see you. 🤙
— Ryan Rincon, CEO and Founder at The Wealth Wagon Inc.
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