Yield curve that matters is predicting a recession now
It happened. The section of the U.S. Treasury yield curve that most accurately predicts economic downturns has "inverted," or gone negative.
- And not for an intra-day blip — it's stayed that way for a couple of days now.
Why it matters: This part of the yield curve — the difference between yields on 10-year Treasuries and 3-month bills — has accurately predicted every U.S. recession since 1955.
- When it has gone below zero, a recession followed over the next two years.
Yes, but: Some thought its predictive streak would end when it last went negative in late 2019.
- The economy was basically fine, until the COVID crisis hit, sending it into a sharp — but brief — collapse that preserved the curve's perfect recession-calling record.
The bottom line: It's just an indicator, not an infallible omen that dooms us. But still, it's worth watching.