The risk of recession is not yet averted
The yield curve remains inverted in the US. A similar constellation last prevailed before the financial crisis.
Source: Bespoke Investments
Generally, long-term bonds yield better yields than short-term bonds because investors want to compensate for holding them longer. If interest rates at the short end are higher than the long end, this is referred to as an inverted yield curve.
In the past, an inversion of the yield curve – at least in the US – was a signal that most reliably heralded an imminent recession or weakening economy.
As measured by the yield difference between the 10-year and 3-month US Treasuries, the yield curve in the US has now inverted for more than 150 trading days in a row. As the bespoke investment chart above illustrates, such long-term levels have only been reached a handful of times in the last few decades – say during the global financial crisis in 2006-2007. The danger of the US economy heading into recession does not appear to have been averted.
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