Should You Fear the Yield Curve?
Bond investors don’t know more than the Fed, but listen to them anyway
There’s a new horror show coming to your screens: Set on Wall Street, it’s called “Inversion of the Yield Curve” and features a chilling, disembodied force that seeps into the minds of the public, triggering panic in markets and hand-wringing on cable news.
As long-term bond yields fall close to short-term yields, we’ve been regularly reminded that an inversion—when long-term yields drop below short-term yields—has preceded each of the past five recessions. The yield curve—a chart of yields against bond maturities—is being...