The St. Louis Fed’s Financial Stress Index dipped to -1.319 in the week ended November 15 after -1.301 in the prior week. Equity markets resumed their climb to all-time highs and bond markets reflected less uncertainty in the outlook with low inflation and mild expansion.
The gap between Treasury yields was relatively stable compared to the prior week with signals for recession growing more distant.
There was 32 basis points between the weekly average for 3-month bills and 10-year notes, just below the 34 basis points of the prior week and continuing at levels not seen since early February. There were 25 basis points between the 2- and 10-year note yields, the widest since 25 basis points in the July 19 week just before the Fed cut short-term rates for the first time in 2019 to insure against a downturn. Treasury yields have not returned to more normal spreads yet, but there is some space that hasn’t been there in the past couple of months.
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