Persistent Recession Signals and Credit Tightening as PMI Slows: Macro Insights

Key findings

1. Recent macroeconomic data over the last 72 hours indicates ongoing recession risk signals with persistent yield curve inversions and slowing PMI measures, alongside credit spread tightening. These developments reflect continued macroeconomic contraction and credit market resilience.
2. The U.S. 10Y–2Y yield spread remains inverted at minus 38 basis points for 413 consecutive days, the longest since 1980, signaling sustained recession risk. The 3M–10Y yield spread also remains deeply inverted at minus 109 basis points, a historically reliable recession indicator. Meanwhile, the S&P Global U.S. Composite PMI has slowed to 51.4, with manufacturing PMI contracting at 48.5, while services PMI remains expansionary at 52.5, though with increased cost pressures.
3. The U.S. High-Yield OAS has tightened by approximately 20 basis points since January, now at 3.59%, suggesting markets are not currently pricing in significant credit stress. The Conference Board Leading Economic Index declined by 0.4% month-over-month in January 2024, indicating continued economic slowdown.