Taps Coogan – November 13th, 2022

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The following video, from Reddit creator JCC Eagle, highlights the increasingly extreme inversion of the Eurodollar futures yield curve.

For an explanation of the Eurodollar yield curve, read this. In essence, future contracts for LIBOR are suggesting that traders now see the Fed cutting rates fairly aggressively in 2023 and 2024. That would presumably only happen in a recession.

The most recession-predictive parts of the Treasury yield curve, the 10-year vs 2-year and the 10-year vs 3-month have also been inverted since June and October respectively. Such yield curve inversions have proceeded every single recession since World War II (including the 2020 recession) and only given one false alarm in the 1960s.

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