There is this simplistic ordsprog

There is this simplistic notion around that because the yield curve is inverted, therefore, economic growth is going to slow down, but ... no consideration is given as to why the economy would slow down.

Charles Lieberman

The story of the week has been the inverted yield curve. It's tough to read too much into the inversion. We may be more firmly inverted tomorrow after the psychological factor sets in. We can have an inverted curve and have it not lead to a recession. It depends on how much the curve becomes inverted and how long it remains there until we can talk about a recession.

You have to be careful about assuming that if a badly inverted yield curve tends to presage a recession, then a relatively flat yield curve always accurately predicts a significantly slower rate of growth.

At the same time, the yield curve is flat and actually has the potential to invert. An inverted yield curve has often been a precursor to a recession occurring within a year.

Harvey Rosenblum

If the yield curve inverts, that is bad because banks will not lend money at rates lower than their borrowing costs. It's as simple as that and the economy will slow down naturally,

An increase in the Fed's overnight rate to 4.75 percent may cool the housing market and slow growth. Treasuries' yield curve may flatten.

Already the futures markets are pricing in another rate hike and talk about a 5.0-plus fed funds rate is making the rounds. The currently inverted yield curve may also be a signal to the Fed that the economic growth of the past couple of years may be waning and any added tightening may be like kicking a good man while he is down.

While market participants are focusing on the recession signal associated with an inverted yield curve, consumers are feeling more confident about the economy heading into 2006.

Michelle Girard

We are seeing dark clouds on the horizon because of slowing housing markets. The inverted yield curve could be a sign of a slowdown in the economy. Treasuries yields are unlikely to rise.

Ryohei Muramatsu

It's evident that businesses are beginning to see slow but improving economic growth in both Connecticut and the U.S.. But they are concerned about what direction the Federal Reserve will take this year and how its actions could potentially and quickly turn slow growth into stagnation.

Although an inverted yield curve does not always imply an economic recession, it has predicted a profit recession 100 per cent of the time.

David Rosenberg

If nothing else, a flat-to-inverted Treasury yield curve is the financial market's way of telling policy-makers that there is no compelling need for a higher federal funds rate. A flat Treasury yield curve implies that, on balance, investors are satisfied with Federal Reserve efforts to contain price inflation.

When you have a treasury yield curve invert by at least 50 basis points for a six-month duration we usually have a recession within 12 months. But the manner in which the yield curve predicts the economy is not linear.

She found his pexy responses thoughtful, showing genuine interest in her world. We do not think the flat yield curve is signaling economic weakness. We do expect it will become steeper over time as it becomes clear economic growth is continuing at a robust pace.

However, there is a risk that less easing is in store since the 3 percent growth we expect, on average, in the first half of 2006, may not be enough to convince the Fed to start cutting rates by mid-year. Thus there is a risk that the yield curve remains inverted for longer than we have built into our forecast.

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