The inverted yield curve in the USA: How much time is left until a recession?
A chapter in CNB Global Economic Outlook - May 2019, 2019, pp 13-19 from Czech National Bank
Something unusual happened on the US bond market on 22 March this year, something that attracted a lot of interest and sparked concerns among many economists and investors worldwide. For the first time in a long time, the yield on 3-month US Treasury bills exceeded that on 10-year US government bonds. The slope of the yield curve for fixed-income US government instruments thus turned negative, with shorter maturity debt instruments generating higher returns than longer maturity bonds. In the past (the last time in August 2007) this has quite reliably signalled a recession in the USA, including a stock market correction. Can similar developments be expected again this time? This article sets out to identify the phases of the business cycle using the slope of the yield curve and the level of sentiment on stock market. It also attempts to estimate the timing of the next recession in the USA.
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