The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Capital Markets

Derivatives Markets: Inversion means trouble in US structured notes

The very unusual phenomenon of curve inversion has made a return to the US dollar swap market, and its re-appearance is causing quite a stir.

A version of this article first appeared in Total Derivatives.

Total Derivatives is the prime source of real-time news and analysis of the global fixed income derivatives markets.

Authors: and It is not something that happens very often. In fact, on average, it has occurred less than one day per year over the last 15 years. But when it does happen – as it has since mid November –  it tends to raise eyebrows in the fixed income derivatives markets, and raise the anxiety levels of investors in structured products.

Treasury yield curve gets familiar with inversion

Historically, the US Treasury yield curve has, in general, assumed a positive shape. This is the result of the “term premium” – the fact that investors demand a higher yield for longer-dated bonds because of the higher risk that inflation may erode the value of their returns over the longer holding period.

The Treasury curve sometimes inverts, however. Indeed the spread between the 2y and 10y Treasury yields – the 2s/10s Treasury curve – has been below zero for much of 2006.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree