1. Its worked everytime since 1960. Except once. (that failure did show a drop in gdp and a credit crisis though)
2. Its not the 2/10 to watch out for. Its the 3month/10yr.
3. It needs to invert for a reasonable period, some say 90 days.
4. The spread should be reasonable, -20 to -40bp.
5. It would be unwise to plan short term trades using the IYC. Its a predictor of events to come, foreshadowing events 6-18months ahead.
6. The reason for inversion may not just be a collected level of negative indicators, the curve can be affected by the economy and certain circumstances. Therefore to try and identify a specific causual effect and result is different for each inversion.
eg, it maybe as a result of percieved lack of future inflation or a need for higher risk premiums.
Lesson endeth. :-)
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