top of page
  • Writer's pictureIshfaaq Peerally

Yield Curve Inversion - Recession Coming?

Normally, each time the yield curve is inverted, we see a recession in less than 2 years. The 10-year - 2-year spread is now negative, which means that the yield on the 10-year treasury bonds is lower than that on the 2-year treasury bonds. This happens when investors expect the Federal Reserve System to raise interest rates, thus, causing a recession. Will we see a recession this time?

If inflation persists, the Fed will be forced to raise interest rates rapidly and it can lead to a recession.

The Fed is not expecting a recession anytime soon since they mostly follow the 2-Year - 3-months spread and it is increasing. The Fed prefers this indicator since they have more control over short-term rates.

With one indicator pointing towards a recession and another telling us a different story, it is hard to predict what will happen. And we better listen to Warren Buffett and buy great businesses at discount prices, rather than trying to predict macroeconomics.

3 views0 comments

Recent Posts

See All


bottom of page