Flattening US yield curve: different this time? – UOB

Researchers at UOB Group have assessed the recent performance of the US yield curve and gave their prospects.

Key Quotes

“The 2s10s US Treasuries yield spread has narrowed by half this year from above 130 bps in Jan to currently below 70 bps”.

“Historically, the flattening of the US yield curve, followed by subsequent brief inversion is a precursor for US economic recession”.

“However, this time, the predictive power of the flattening US yield curve may be weaker and less straight forward. The 2 reasons may be longer term yield term premium is now much lower and the large global stock of negative yielding bonds also depress long term US Treasuries yield”.