Since The Fed began its ‘tightening cycle’ in December 2015, the Treasury yield curve (2s10s) has flattened dramatically, tumbling back today towards cycle lows (and well below Trump-election-hope lows). What is perhaps more worrisome is the historical trend strongly suggests this trend is far from over and an inverted yield curve looms.

The trend is clear that Fed policy is running counter to growth expectations and all the hope that Trump offered has been erased completely.

But what happens next during a Fed tightening cycle? Citi explains…

Which means that, given the current 85bps level of the 2s10s spread, 100bp more of flattening will mean an inverted curve, confirming the short-term recessionary fears many are feeling as US Macro Surprise Indices collapse…