Assessing the risk of inverting yield curve in US…

Speech by James Bullard of St Louis Fed given on 1 Dec 2017.

He says based on current trends and future projections, US yield curve could begin to invert around late-2018:

• Let’s suppose that longer-term yields remain near the average since 2012.
• Let’s also suppose that the FOMC remains on track to raise the policy rate at the pace suggested in the SEP.
• Under this scenario, the U.S. nominal yield curve would invert in late 2018.
• This scenario would not play out if either (1) the FOMC does not raise the policy rate as aggressively as suggested by the SEP, or (2) longer-term rates begin to rise in tandem with the policy rate.

And then as we know, inverted yield curve is a great predictor of recessions.

We are back to full circle with so much monetary interventions and policies. It started with US yield curve inverting in 2007 whose signs were ignored. This was followed by failure of Lehman and AIG leading to all kinds of monetary interventions. And now 10 years later, we are again seeing signs of inverted yield curve…

4 Responses to “Assessing the risk of inverting yield curve in US…”

  1. Assessing the risk of inverting yield curve in US… | Me Stock Broker Says:

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  2. Assessing the risk of inverting yield curve in US… – Courtier en Bourse Says:

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  4. vikramml Says:

    The yield curve inverted in early 2006 and it actually turned positive in Q1 2007 and continued to rise through 2007.

    https://fred.stlouisfed.org/series/T10Y2Y

    I keep asking people on twitter who post yield curve charts starting from 2007 to show the chart from 2005-6 onwards to show the full cycle. Any chart or comment stating “since 2007” should be ignored.

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