Does the Yield Curve Signal Recession 2025

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An inverted yield curve is unusual: a normal yield curve slopes upward, displaying yields that run from low to high as maturities increase. The inverted curve reflects bond investors expectations for a decline in longer-term interest rates, a view typically associated with recessions.
During the first half of a recession stage, core bond returns (i.e., Treasuries and investment-grade securities) are historically positive, while returns for high yield bonds, equities, and commodities are negative.
On average, a recession occurs about a year after the yield curve inverts.
The historically longest inversion of the U.S. yield curve, which lasted 793 days, is now behind us. The spread between two- and ten-year U.S. Treasury yields is back in positive territory.
In our nations history, the yield curve has been extremely accurate in predicting the future health of our economy. The curve inverted before or predicted every major recession in recent history including 1991, 2000, and 2008.
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Two years ago, the yield curve inverted. That means short-term interest rates on Treasury bonds were unusually higher than long-term interest rates. When thats happened in the past, a recession has come. In fact, the inverted yield curve has predicted every recession since 1969
Yield curve inversion takes place when the longer term yields falls much faster than short term yields. This happens when there is a surge in demand for long term Government bonds (e.g. 10 year US Treasury bond) compared to short term bonds.
A 2009 paper identifies twelve economists and commentators who, between 2000 and 2006, predicted a recession based on the collapse of the then-booming housing market in the United States: Dean Baker, Wynne Godley, Fred Harrison, Michael Hudson, Eric Janszen, Med Jones Steve Keen, Jakob Brchner Madsen, Jens Kjaer
Historically, when the US yield curve inverts, a recession subsequently occurs, although the lead time can be lengthy and historically has varied considerably (~10 months to 3 years).
However, the Yield Curve remained inverted well into 2007. By the end of January 2008 one month into the Great Recession the Yield Curve had returned to its normal shape. Yet economic activity continued to decline and the recession persisted until June 2009.

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