Wednesday, February 12, 2020
Yield Curve Inverts
In the textbook, we discussed a normal, or upward sloping, term
structure, and an inverted, or downward sloping, term structure. The
U.S. Treasury yield curve inverted again on Monday,
after inverting at the end of January and in March 2019. An inverted
yield curve has preceded the last seven U.S. recessions. However,
several analysts are not convinced a recession will result from this
inversion. U.S. Treasuries are regarded as a safe haven investment.
Given economic issues around the world, the low 10-year yield may be
driven by the demand for this bond, not U.S. economic conditions. Here
is a question for you: Notice in the first sentence (and in the
textbook), we discuss the term structure, but then change to the yield
curve. What is the difference between the term structure and a yield
curve?