Will the inverted yield curve lead to recession?

Will the inverted yield curve lead to recession?

The US Treasury yield curve, specifically the spread between the 10-year US Treasury rate and the 2-year US Treasury rate, briefly inverted on the morning of Aug. 14. As of early afternoon, the spread was roughly 1 to 2 basis points wide.

The brief inversion follows the inversions earlier this year between the spread of short-term rates (such as the Federal funds rate and the 3-month Treasury bill) and the benchmark 10-year rate. The equity market immediately sold off due to fears of a looming recession — of all the macro indicators, the bond market has tended to get it right more often than most others.

What is our take on the situation?

Read the market flash update from Kristina Hooper, Brian Levitt and Timothy Horsburgh.

Investment risks

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Important information

This article is for Professional Clients only. Data as at 14 August 2019, unless otherwise stated.

Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice.

This document is marketing material and is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell securities.