The yield curve plots Treasury bond yields across different maturities. A normal curve slopes upward (longer maturity = higher yield). An inverted curve (short-term yields above long-term) has historically preceded every US recession. The steepness of the curve reflects market expectations for growth and inflation.
The difference between the 10-Year and 2-Year Treasury yields. When negative (inverted), it signals that markets expect economic slowdown or recession. The curve typically un-inverts (steepens) just before the recession actually begins — the steepening after inversion is the danger signal, not the inversion itself.
Real yields are nominal yields minus expected inflation (measured by TIPS). Positive real yields mean bondholders earn above inflation — tightening financial conditions. Negative real yields mean cash is losing value, pushing investors into risk assets. Rising real yields are bearish for gold and growth stocks.
Breakeven rates measure the market's inflation expectations (nominal yield minus TIPS yield). Rising breakevens signal markets expect higher inflation ahead. The Fed watches 5Y and 10Y breakevens closely — if they become "unanchored" above 3%, expect aggressive tightening.
Credit spreads measure the premium investors demand over risk-free Treasuries. Investment Grade (IG) spreads reflect broad corporate credit risk. High Yield (HY) spreads reflect distressed/speculative credit risk. Widening spreads signal risk aversion and economic stress. Tightening spreads signal confidence. HY spreads above 500bps historically coincide with recessions.
The MOVE Index is the VIX of the bond market — it measures the implied volatility of US Treasuries over a 1-month horizon, derived from option prices. Values below 80 indicate a calm market and stable rate expectations. Between 80 and 100 the market is pricing significant uncertainty about the next Fed moves. Above 100 we are in stress territory: dealers widen spreads, bond liquidity dries up and price moves become erratic. The MOVE is a leading indicator for risky asset volatility — when it spikes sharply, it tends to precede equity and credit selloffs by a few weeks.