Spreads between two-year Treasuries and their three-, five- and 10-year counterparts dove in the opening days of December. The curve between the two-and five-year Treasuries inverted Monday, closing at -0.36 basis points, then becoming more pronounced Tuesday, currently near -1.6 basis points. Spreads between the two-year Treasuries and three years remain positive but have fallen 40% since Friday's close. Additionally, the spread between two-year and 10-year Treasuries is currently at about 10.4 basis points, half of what it was in late November.
Markets historically haven't responded well to flat or inverted yield curves, with the forward 12-month returns typically declining in the wake. These few days of December mark the first time since 2007 where parts of the yield curve have inverted.