A sign of a coming recession? On Monday, the yield on 5-year U.S. Treasury notes fell below those of 3-year notes for the first time since 2007, which many investors believe is a sign of a coming economic slump. Indeed, every U.S. recession since World War II was preceded, typically by six months to two years, by a similar “inversion” of the yield curve between 2-year and 10-year Treasury notes. (Ahead of the 2008 crash, the 3-year and 5-year yield flipped for the first time in late 2005.) Right now, the 2- and 10-year curve is flattening, but not quite inverting – its spread hit its lowest level since 2007. And in any case, it’s unclear whether an inverted yield curve is as good a predictor of recessions as it once was. The yield has jumped the gun a couple of times in the past, inverting and then steepening again with a recession nowhere to be found, no doubt complicated by the massive quantitative easing programs undertaken by major economies over the past decade. Still, it
Daily Memo: The US Economy, an Israeli War, China in Panama
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