By Davide Barbuscia

NEW YORK (Reuters) – Recession concerns are showing up more prominently in the U.S. Treasury yield curve, as soaring commodity prices in the wake of Russia’s invasion of Ukraine fuel worries over inflation and slower growth.

Investors may have been anticipating a slowdown in economic growth, as the gap between 10- and 2-year yields was narrowest since March 2020.

Jonathan Cohn is the head of rates trading strategy and said that on a rolling basis for two months, the flattening rate has been at its extremes since 2011. Credit Suisse (SIX:).

The yield curve is a key indicator of the U.S. economy for market participants. A reversed curve is one in which the rates of short-term government debt are higher than those for longer-term debt. This has been proven reliable to forecast past recessions.

The Fed will tighten its interest rates even as growth slows, according to the investors.

Although expectations for a 50-basis point increase this month are now almost overpriced, the markets expect more than 150 basis points in tightening next February. [FEDWATCH]

Jeffrey Halley at OANDA is a senior market analyst in Asia Pacific. This refers to strong and weak inflation.

Prices reached $120 per barrel Thursday after U.S. sanctions targeted Russia’s oil refining industry and raised concern that future oil and gas exports might be affected.

Yet, growth is still strong. In February, U.S. unemployment fell to 3.8%, a new low for the country. Friday’s Labor Department employment report was closely monitored by the Labor Department. These numbers raise optimism that the economy can withstand increasing headwinds due to inflation, geopolitical tensions, and tighter monetary policy.

Nevertheless, flattening of the curve suggests this may not hold true.

Cohn, Credit Suisse: “Flattening is faster because the Fed sees inflation moderation as more important than backstopping risk appetite.”