by Josh Schafer at yahoo! finance
The US economy has avoided slipping into recession all year, but one closely watched indicator shows it’s on the brink.
Usually, yields on longer-maturity bonds exceed those of shorter ones. An inverted yield curve happens when the reverse occurs.
Some track the spread between 2-year and 10-year Treasury notes for signs of an inverted yield curve. But Canadian economist Campbell Harvey’s definition uses the difference between three-month bills and 10-year notes, a spread which turned negative in November 2022. It’s a perfect 8-for-8 in predicting every recession since World War II.
The amount of time it takes after the inversion for the economy to fall into a recession can vary. The past four recessions occurred when the spread between the two yields narrowed and came close to reverting back to normal. That is what is happening now…Continue Reading