Much has been said in the last week about the inversion of the US Treasury yield curve between 5-year and 2-year yields. While most analysts have warned that yield curve inversions are an unreliable indicator of recessions, not all inversions are created equal. Going back to 1976 we have analysed the predictive power of three different measures of yield curve steepness in the US. First, we examined our preferred measure of 10-year yield minus 2-year yield (10s-2s). Then we examined the difference between 10-year yields and 3-month yields (10s-3Ms) and finally 5-year minus 2-year yields (5s-2s).
Not all yield curve inversions are created equal
Not all yield curve inversions are created…
Not all yield curve inversions are created equal
Much has been said in the last week about the inversion of the US Treasury yield curve between 5-year and 2-year yields. While most analysts have warned that yield curve inversions are an unreliable indicator of recessions, not all inversions are created equal. Going back to 1976 we have analysed the predictive power of three different measures of yield curve steepness in the US. First, we examined our preferred measure of 10-year yield minus 2-year yield (10s-2s). Then we examined the difference between 10-year yields and 3-month yields (10s-3Ms) and finally 5-year minus 2-year yields (5s-2s).