DB: Yield Curve Flattening Is A Good Thing!

Some analysts are worried about yield curve flattening, but Deutsche thinks it's a good thing.

At the beginning of this week, the spread between the two and 10-year Treasury yields flattened to 78.77 basis points — the lowest level since September 1. For bond watchers, this move has sent a distressing signal. The so-called “yield curve” has predicted almost every US economic downturn since the second world war and if this indicator is to be believed, it’s time to start getting ready for an economic contraction. When the yield curve flattens and eventually inverts, it tends to indicate a recession, the opposite of what equities are currently indicating.

There may be a painful correction on the horizon as a result. Indeed,...