Bond Yield Curve Continues To Flatten, Are We Headed Towards A Recession?

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Wall Street is fretting about the flattening yield curve, concerned that if the trend continues – there could soon be a clear indication that a recession is imminent.

The gap between two-year Treasury notes and the 10-year benchmark has recently touched its narrowest point in more than a decade. The yield curve is often looked to as a measure of sentiment of the economy. Typically, the yield curve steepens as investors demand higher yields for lending further in the future. A flattening yield curve can be taken as a signal that investors are hesitant about the longer term outlook for the economy.

An inverted curve, in which the yields for near-term debt exceed those for longer-dated debt, has been a reliable leading indicator for recessions since 1960.

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