The inverted 2s/10s spread is a warning sign for investors and economists as it indicates investor concern about the economy's future prospects. It suggests that short-term interest rates are higher than long-term rates, which can lead to a credit crunch and stifle economic growth.
The bond market is closely watched by investors and economists because it can provide insight into the overall health of the economy. As a result, a plunging spread between the 2-year and 10-year Treasury yields can be seen as a sign of investor concern about the economy's future prospects. This concern is warranted as a recession can cause widespread economic hardship, including job losses, reduced wages, and a decline in consumer spending.
