Curve Ball – Is The Yield Curve Still A Dependable Signal?

Curve Ball - Is The Yield Curve Still A Dependable Signal? by 720Global

Over the last 30 years, there has been a widely held belief, supported by data, in the predictive powers of the “slope” of the yield curve. The slope of the yield curve is a simple calculation comparing interest rates of various maturity terms. Traditionally, the slope of the yield curve is measured by the difference between interest rates of shorter term government debt, such as the 3-month Treasury Bills or 2-year Treasury Notes, and long-term government debt such as 10-year Treasury Notes and 30-year Treasury Bonds. A steep yield curve, where long term government yields are significantly higher than short ones, implies economic expansion in...