The Yield Curve has some predictive history. The curve has been inverted (short term yields higher than long term) for quite some time now. When this inverted curve goes back to normal (positive slope) a recession has usually occurred within 9 months. A lot of the recent market activity can also be seen as a harbinger of future higher rates, increased unemployment, lower GDP growth.
- An inversion in this part of the yield curve typically indicates that a recession is likely in the next one-to-two years, though this inversion has lasted longer than in previous episodes. The curve usually turns positive before a downturn begins.
- Sep 13, 2024 · When the yield curve, which is the difference between the 10-year and the 2-year, turns positive, or uninverts, right before the Fed starts cutting interest rates, a recession tends to kick.
- The yield curve on U.S. government bonds has been upside down since the middle of 2022. The underlying circumstances of the yield curve's inversion, however, have changed dramatically in just the past few days. This is actually the situation investors should fear, as the unwinding of an inverted yield curve usually points to trouble on the horizon.
