Deeply Inverted US Treasury Yields Sound Alarm on US Recession  

In just over three months, Campbell Harvey, the Duke University professor who pioneered the use of the spread between 10-year and 3-month US Treasury yields as an indicator of future economic growth, completely changed his views on US economic prospects.

Harvey said this week that the huge inversion between 10-year and three-month US Treasury yields indicates the possibility of a "deep recession" in the US economy.

Harvey said on Wednesday that the current inversion of the spread between 10-year/3-month US Treasury yields is very alarming relative to the current yield level, which is equivalent to a huge and serious inversion.

As of Wednesday, the inversion between US 10-year and 3-month Treasury yields reached -155.8 basis points, significantly larger than that seen before the financial crisis of 2007-2008 and in the late 1980s.

This inversion of the yield curve typically provides early warning of a recession six to 18 months ahead.