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In a recession, interest rates tend to go lower so investors are interested in moving to the safety of bonds and in locking in current high yields. This increases the demand for longer-term bonds thereforeu00a0 boosting their prices and lowering their yields. The curve typically turns negative late in the business cycle as investors rush to the safety of bonds.<br>For Stock Market Research, visit Smart Money Gains.
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The The Inverted Inverted Yield Yield Curve Curve Spells for for Markets Markets Spells Trouble Trouble Since the 1970s, an inverted yield curve has preceded every U.S. recession. Inverted yield curves lasting more than a month have preceded every recession in the last 50 years. Looking for Stock Market Analysis? Visit Smart Money Gains. A yield curve is a chart tracking government bonds, with interest rates and maturities. An inverted yield curve is an interest rate environment in which long-term debt has a lower yield than short-term debt of the same credit quality. Right now the yield curve inversion is the biggest since 2007 and this spells trouble for markets.
Why this matters? In a recession, interest rates tend to go lower so investors are interested in moving to the safety of bonds and in locking in current high yields. This increases the demand for longer-term bonds therefore boosting their prices and lowering their yields. The curve typically turns negative late in the business cycle as investors rush to the safety of bonds. For Stock Market Research, visit Smart Money Gains. Bottom Line Investors trying to navigate this changing landscape should remain conservative and watch this play out. The inverted yield curve is a symptom of a recession but by many measures the economy is healthy, with low unemployment and steady growth. It is clear that the economy is decelerating and the Trade War is having a major impact on investor sentiment. According to the FED there is a 27% probability of a U.S. recession in the next 12 months, based on this data.
