inverted yield curve post-mortem

The phrase in the subject line used to come up in this group fairly often over the last few years, I haven't seen it lately.

Not having cracked open an economics textbook in decades, I'm wondering, first: are we no longer in that situation? Anecdotally, I see more bank ads these days with higher CD rates for longer terms.

Second, was the inverted yield curve of the recent past truly the indicator it was thought to be (recession, or whatever)?

It's been a long time since I've had to even think about putting cash in a CD with a term longer than 18 months, I'm kinda rusty...

-Mark Bole

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The yield curve is no longer inverted see:

It kind of depends on whether you think we are in a recession or not. But we are certainly in a significant slow down, so I'd say the inverted yield curve scored another prediction success.

-- Doug

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"Mark Bole" wrote

According to the following two sites, for about two months now the curve has clearly been not inverted:

I think the theory that an inverted yield curve precedes a recession relies somewhat on numerology. Or one could say it is economics, so the rules are not hard and fast.

The talk is that the Fed will raise rates again "soon" to try to prevent further inflation. I think I would wait until five year rates were back up to at least 5%. Or buy really short term CDs. Or do the ladder (say six-month rungs, longest, five years), since historically, the curve flattens out again beyond five years.

If you can stand the risk, yields on some conservative stocks look pretty good, with many having a nice rate of increase.

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Yield curve methodology may not have been application for the past 15 years or so. The 10 and 30 year bond rates are no longer strongly affected by any actions of the US government and have been held ow over that period. Theres huge international and domestic demand for that kind of bond which keeps rates low. This despite all the sniping about the quality of the US dollar. Maybe the declining dollar and inflation will eventually force these rates up.

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