Is Something About To Break?

The 2-year/10-year Treasury yield curve has been inverted in recent weeks. The yield curve has a history of inverting during Fed monetary tightening cycles when investors start to believe that the rise in interest rates may be about to cause a financial crisis, which quickly turns into a widespread credit crunch and a recession. Is something about to break now? Not according to the VIX and high-yield corporate bond credit spread (charts below). Then again, consider the following:

(1) Credit Suisse. Today's WSJ reports: "Credit Suisse shares are down 21% this month and spreads on its credit-default swaps, a type of insurance against default, rose to their highest level of the year on Friday." The bank is scrambling to restructure its operations.