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UK bond yield curve inverts briefly, by most since 2019

08/10/2022 | 12:17pm EDT

LONDON, Aug 10 (Reuters) - Part of Britain's government bond yield curve inverted on Wednesday by the most in three years, following a similar move in U.S. Treasuries driven by rising fear of recession.

The two-year gilt yield rose above the 10-year yield by as much as 6 basis points, though by the end of the trading session the spread had closed to roughly zero, according to Refinitiv data.

The last time the 2- to 10-year curve inverted by so much was in August 2019, when Britain's economy had slowed to crawl.

Investors watch parts of the yield curve as recession indicators, especially in the United States where it has also inverted in recent weeks in the same two- to 10-year space.

Normally, a yield curve slopes upwards as investors expect to be compensated for the risk of owning longer-maturity debt.

An inversion - where shorter-dated yields are higher than longer-dated ones - is sometimes considered a warning of a risk of recession.

The curve in Britain inverted before the recessions of 1980/81, 1990/91 and 2008/09. It was also inverted between 1997 and 2001, when the UK economy continued to grow solidly, although 2001 saw recession elsewhere.

With scant British economic data out on Wednesday, gilt yields were moved primarily by weaker-than-expected U.S. inflation data. (Reporting by Andy Bruce; Editing by Mike Harrison)


© Reuters 2022