Fed Study Finds Inverted Yield Curve Still Good Recession Alert
- San Francisco Fed research says this time still not different
- Negative curve has predicted all nine recessions since 1955
JPMorgan's Craig Says Bond Yields Could Rise Above 3-3.5%
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An inverted yield curve remains a powerful signal of a looming recession and that is still the case even if the current ultra-low level of U.S. interest rates are taken into account, according to fresh research by the Federal Reserve Bank of San Francisco.
A negative curve, where the return to investors on shorter-dated securities is above that on longer-term bonds, has predicted all nine U.S. recessions since 1955, with a lag of six to 24 months. Some have argued that this time is different, because interest rates are so low and a flattening yield curve doesn’t necessarily mean the U.S. economic expansion is heading for trouble.