In today’s Comment we will take a closer look at the predictive power of the US Treasury yield curve with regards to ‘forecasting’ recessions. The question on our minds is rather straightforward. We haven’t seen a sustained Treasury yield curve inversion, but talk of a US recession – and, by that extend – a Eurozone recession – is everywhere these days. So, can we have a recession without significant and sustained inversions in key segments of the yield curve? As per our prior research on inversions, we define a sustained inversion as an inversion that lasts many months. Significant and key segment as in a spread of tens of basis points of a short end yield or rate – the fed funds, 3-month Treasury bill yield, 2-year Treasury yield – over the 10-year Treasury yield.


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