What is a yield curve and why does it matter? For anyone new to the world of markets, here’s a useful explainer ig.ft.com/the-yield-curv…
Investors do not have a crystal ball, but the yield curve is the next best thing. It shows the interest rates that buyers of government debt demand in order to lend their money over various periods of time — whether overnight, one month, 10 years, or more ig.ft.com/the-yield-curv…
Because lending to governments in big developed economies is considered a safe bet, these borrowing rates are mostly influenced by investors’ assessment of the prospects for economic growth and inflation ig.ft.com/the-yield-curv…
The US yield curve in particular acts as a kind of barometer of investors’ collective wisdom about the future path of the world’s largest economy, and has a strong record in signalling downturns before they arrive ig.ft.com/the-yield-curv…
The yield curve is usually upward sloping, whereby a higher fixed rate of return is earned from lending money for longer periods of time — but it tends to flatten when investors expect an economic slowdown ig.ft.com/the-yield-curv…
An ‘inversion’ of the yield curve has preceded every US recession for the past half century ig.ft.com/the-yield-curv…
Why does the yield curve have the power to predict recessions?
There are two possible explanations…
ig.ft.com/the-yield-curv…
Curious about what’s been happening with the yield curve more recently? Full story here: ig.ft.com/the-yield-curv…
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