image image

    Global Macro Research: Yield-curve inversion – an unreliable recession signal?

    Global Macro Research: Yield-curve inversion – an unreliable recession signal?

    13 October 2023 Global macro, Fixed income
    • Yield curves for major developed market government bonds have been materially inverted for over a year. Historically, yield-curve inversion has signalled a recession to come, as the market prices in future interest rate cuts from central banks – but there are few, if any, signs of a meaningful recession ahead.

    • Our analysis suggests there is a factor artificially suppressing the longer end of the yield curve: the expansion of central banks’ balance sheets following the global financial crisis.

    • Central banks’ balance-sheet reductions could remove this distorting effect over time, eventually helping restore the value of yield-curve inversion as a signal for recession.
    image
    Click here to read the full whitepaper
    1857 kb
    Back to top