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Recession Warning Alarm Bells Start Ringing

Warning: Recent Inverted Yield Curve on US Bonds Historically Precedes Recessions

Earlier this week (Monday December 3rd, 2018) the yields on the US 3-year and 5-year Treasury and the 2-year and 5-year notes became inverted for the 1st time in 10 years!

Inverted bond yields

Inverted bond yields historically precede recessions

An inverted yield is defined when the LONGER term debt carries less yield than a SHORTER term.

Typically the longer the maturity date the more the yield, because the chances of things changing increases with the longer time frame so markets demand higher rates of return for higher risk.

What are the odds of a recession? Very likely— when yields have became inverted in the past on US bonds a recession typically follows.

When— is the next logical question for a possible recession? Typically inverted yield curves occur approximately within a year or year and half of a recession.

Notes on the Graphic:
The zero percent line (below that figure is when yields become inverted). The gray columns indicate previous US recessions.

What to do now? Stay alert and keep watching: So far only the 5-year and 3-year note rates and the 2-year and 5-year notes have inverted, the difference between the more closely watched 10-year and 2-year Treasury rates could be the next threshold to cross for even a louder and higher pitch economic alarm.

Sources: FRED Blog Link


Disclaimer: This post is for informational and entertainment purposes only— it is not financial advice or is in anyway intended to provide any financial recommendation.

Green-Eco-EV News Reporting by Ken Green Burridge

kenneth green burridge

Independent green journalist, EV of the Year Judge, photographer, author and sustainability activist that has published over 1000 articles. Mr Burridge’s travels have taken him to over 40 countries and 300+ major cities. He is originally from the USA, but has been residing in Australia for the last seven years. Connect to Ken Burridge on: Twitter, steemitfacebook, Google+Linked in or website