The bond market is about to do something noteworthy while everyone’s distracted by Nvidia [Video]

While traders were focusing on Nvidia’s results Thursday, something big was happening in the bond market. The inverted spread between the 2- and 10-year Treasury yields, considered a classic recession indicator, is nearly back to normal.

In Thursday trading, the 10-year yield was less than 2 basis points below the 2-year rate, narrowing an inversion that began in June 2022. An inverted curve has been the harbinger of most every recession in the U.S. since World War II, as it indicates that traders see growth over the longer term slowing. (1 basis point equals 0.01%.)

2 yr/10 yr spread, 3 months

While a recession has yet to occur, the end of the inversion does not necessarily mean we are out of the woods yet.

In fact, the yield curve generally does normalize just …