7 July 2010

The Globe said that such yield curves (when the short rates are above the long ones) “preceded the last seven recessions”.
According to the Cleveland Federal Reserve, “practically speaking, it means that an inverted yield curve is a sign of a recession in about a year”.

Nevertheless, we shouldn’t forget that no indicator can give you a 100% guarantee. We all know that the yield curve has already given us false signals in the past. In addition to it, as April and May showed, the bond market tendency can change in a moment.