• Login
NORVANREPORTS.COM |  Business News, Insurance, Taxation, Oil & Gas, Maritime News, Ghana, Africa, World
  • Home
  • News
    • General
    • Political
  • Economy
  • Business
    • Agribusiness
    • Aviation
    • Banking & Finance
    • Energy
    • Insurance
    • Manufacturing
    • Markets
    • Maritime
    • Real Estate
    • Tourism
    • Transport
  • Technology
    • Telecom
    • Cyber-security
    • Cryptocurrency
    • Tech-guide
    • Social Media
  • Features
    • Interviews
    • Opinions
  • Reports
    • Banking/Finance
    • Insurance
    • Budgets
    • GDP
    • Inflation
    • Central Bank
    • Sec/Gse
  • Lifestyle
    • Sports
    • Entertainment
    • Travel
    • Environment
    • Weather
  • NRTV
    • Audio
    • Video
No Result
View All Result
No Result
View All Result
NORVANREPORTS.COM |  Business News, Insurance, Taxation, Oil & Gas, Maritime News, Ghana, Africa, World
No Result
View All Result
Home Features

The Yield Curve Is Disinverting. Why Should I Care?

11 months ago
in Features, highlights, Home, home-news, latest News
2 min read
0 0
0
93
VIEWS
Share on FacebookShare on TwitterShare on Linkedin

The Yield Curve Is Disinverting. Why Should I Care?

The US Treasury yield curve has a long history of raising alarms among investors and economists. That’s mostly because when it’s flipped upside down from its usual upward slope in what’s called an inversion, traders start getting anxious about the health of the economy. Almost every recession since 1955 has been preceded by an inverted curve, except recently when it inverted in 2022. When the curve disinverts, or returns to its normal shape, as it did on Sept. 4, some say that could signal a downturn is soon approaching. Still, despite the 2022 inversion, a slump has yet to materialize. This has led some to again question whether the curve’s shape is a reliable harbinger of recession.

What’s a yield curve?

It’s a visual representation of the difference in the compensation investors will receive for choosing to buy shorter- versus longer-term debt. Most of the time, bond investors demand a higher return, or yield, for the greater uncertainty that comes with locking away their money for longer periods. So yield curves usually slope upward.

What changes in the shape of the curve matter most?

The most alarming developments are yield curve inversions. Economist Campbell Harvey showed decades ago in his research that the shape of the curve is linked to the path of economic growth. When the yield curve inverts — rates for short-term bonds exceed those of bonds with longer maturities — a US recession has historically followed. A yield curve flattens when the spread for longer-term bonds drops to zero — when, for example, the rate on 30-year bonds is no different from the rate on two-year notes. If the spread turns negative, the curve is considered inverted. (Conversely, when longer-term rates rise relative to shorter-term ones — and the spread widens — the market calls this “steepening.”)

Why is the curve shape important?

RelatedPosts

Parliament Adjourns Sine Die After Intense Legislative Session Marked by Reform Calls and Tributes

GACL Terminates Evatex Revenue Assurance Contract Amid OSP Probe

Cyber Security Authority Flags Rising Mobile Data Scam, Cautions Public

The yield curve has historically reflected the market’s sense of prospects for the economy, particularly inflation and what kind of policy the central bank is likely to adopt (whether it’s adding or removing stimulus, or trying to keep the status quo). Normally, elevated inflation would lead to an upward sloping curve, as rising prices prompt investors to demand greater long-term returns to offset the loss of purchasing power in the payments they eventually receive. But yield curves can invert when investors expect a recession resulting from the Federal Reserve policy lifting interest rates to tame inflation. That connection has made an inverted yield curve a closely-watched indicator of impending economic slumps, like the one that started in 2007. In particular, the spread between three-month bills and 10-year notes has inverted before each of the past seven US recessions.

What is the disinversion telling us?

A restoration of the normal upward slope of the yield curve, or disinversion, typically happens when the Fed starts to lower interest rates or markets start pricing in looming cuts. Since the central bank tends to ease policy when the economy hits a snag, some say such disinversions (instead of the inversion itself) often signal that a recession is imminent. Currently, interest-rate swaps show traders are pricing in over a percentage point of Fed rate reductions over the rest of 2024.

How many yield curves are there? 

You can calculate a curve between any two bonds issued for a different length of time, or tenor. The US Treasury, for instance, issues three-month bonds and 30-year bonds, with an array of other securities in between. Investors look at the spreads, or differences, between the rates at which those bonds are trading. They also consider the predictions embedded in futures contracts on similar bonds. The futures rate basically is the sum of the expected short-term rate that far in the future plus a term premium, which is the extra money that investors demand to lend for longer.

What do the differences between curves mean? 

That can be hard to say. Divergences can reflect the way different tenors capture different stages of the Fed’s monetary policy cycle. The shorter-term yield curve tends to eliminate complicating factors like term premium. Of course, it’s worth remembering that all yield curves reflect market speculation: In the words of Fed researchers, investors inferring the likelihood of recession by looking at the yield curve is “akin to market participants looking at themselves in the mirror.”

Source: bloomberg
Via: norvanreports
Tags: The Yield Curve Is Disinverting. Why Should I Care?US FedUS yieldyield curve

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

I agree to the Terms & Conditions and Privacy Policy.

No Result
View All Result

Highlights

Gov’t Reopens Talks With PayPal to Restore Full Service Access in Ghana

Financial Sector Assets up 34.6% in 2024 to GHS 525.59 Billion

Banking Sector Soundness Remains Robust in 2024 Amid Strong Profitability, Adequate Capital Buffers

Sha’Carri Richardson Withdraws from US Trials Following Arrest

From Singuluma to El Kaabi: Can CHAN 2024 Unleash the Next Hat-trick Hero?

Ghana to Welcome King’s Baton Relay on August 8 Ahead of 2026 Commonwealth Games

Trending

Features

Parliament Adjourns Sine Die After Intense Legislative Session Marked by Reform Calls and Tributes

August 2, 2025

Parliament Adjourns Sine Die After Intense Legislative Session Marked by Reform Calls and Tributes Parliament has adjourned...

GACL Terminates Evatex Revenue Assurance Contract Amid OSP Probe

August 2, 2025

Cyber Security Authority Flags Rising Mobile Data Scam, Cautions Public

August 2, 2025

Gov’t Reopens Talks With PayPal to Restore Full Service Access in Ghana

August 2, 2025
Bank of Ghana

Financial Sector Assets up 34.6% in 2024 to GHS 525.59 Billion

August 2, 2025

Who we are?

NORVANREPORTS.COM |  Business News, Insurance, Taxation, Oil & Gas, Maritime News, Ghana, Africa, World

NorvanReports is a unique data, business, and financial portal aimed at providing accurate, impartial reporting of business news on Ghana, Africa, and around the world from a truly independent reporting and analysis point of view.

© 2020 Norvanreports – credible news platform.
L: Hse #4 3rd Okle Link, Baatsonaa – Accra-Ghana T:+233-(0)26 451 1013 E: news@norvanreports.com info@norvanreports.com
All rights reserved we display professionalism at all stages of publications

No Result
View All Result
  • Home
  • Business
    • Agribusiness
    • Aviation
    • Energy
    • Insurance
    • Manufacturing
    • Real Estate
    • Maritime
    • Tourism
    • Transport
    • Banking & Finance
    • Trade
    • Markets
  • Economy
  • Reports
  • Technology
    • Cryptocurrency
    • Cyber-security
    • Social Media
    • Tech-guide
    • Telecom
  • Features
    • Interviews
    • Opinions
  • Lifestyle
    • Entertainment
    • Sports
    • Travel
    • Environment
    • Weather
  • NRTV
    • Audio
    • Video

Welcome Back!

Login to your account below

Forgotten Password?

Create New Account!

Fill the forms bellow to register

All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In
NORVANREPORTS.COM | Business News, Insurance, Taxation, Oil & Gas, Maritime News, Ghana, Africa, World
This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.
We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it.