It appears that 2s-5s could invert soon. From an economic perspective, that will be a first but wholly insufficient clue that the market is predicting recession. 5s-10s is the more important indicator for us. As the chart attached shows, it has predicted all recessions since 1957 (eight out of eight). The only time it inverted but recession did not follow was in the mid-1960s, but GDP growth did slow from 10% to 2%, so we would still call that a successful signal. The good news is that the curve is currently predicting slower growth, not recession. But if 5s-10s were to invert later in the year, and a broad breadth of other leading and coincidental indicators were pointing down too (such as ISM manufacturing below 50), then an inversion would need to be respected despite suspicion about its usefulness. And if it became clear that the inversion was going to hang around for a while, then HSBC may even step forward and call for a US recession to start sometime in 2006. Ian Morris