Last Week
The major news in the financial markets last week was the appearance of the inverted yield curve. This occurs when the 2-year treasury moves higher than the 10-year longer term treasury. Historically, this has almost always signalled recession.

This inversion, however, may be different. Even Mr. Greenspan seems optimistic about the current financial cycle. Because of the 12 consecutive rate increases by the Fed, this has quickly pushed the 2-year yield up. The 2-year bond is a very short-term instrument and is mostly concerned with short-term data - ie the Federal funds rate. While the 10-year bond is much less concerned with short term interest rate fluctuations. It is mainly concerned with inflation. As there is no clear data on the horizon to suggest near-term problems with inflation, the 10-year bond coninues to drift sideways.