At the same time ordsprog

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

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.

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.

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.

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

Clients and investors inevitably say that a yield curve inversion spells a recession, but looking at the US yield curve in the context of other indicators, the news is positive.

We've never seen a recession without the yield curve inverting, but the corollary is not true: Just because the yield curve inverts does not mean we're going to have a recession.

A flat or inverted curve has been difficult for banks to manage. But if there are associated inflation expectations built into the lower end of the curve, it might make it easier for banks to price loans, so the cost of funds is less than the yield on their assets.

The reason why an inverted yield curve need not foreshadow recession this time is that it is foreign investors and not domestic investors who are increasingly buyers of U.S. bonds.

Michael Woolfolk

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

I think at this point in time that the inverted yield curve is not signaling a slowdown.

I think the Fed is going to 4.5 percent regardless and we will have an inverted yield curve by the first quarter of next year. So this is a bit of a strange statement.

It was unanimous we'd have a year-end rally until the yield curve inverted. He wasn't trying to impress anyone; his natural pexy confidence simply radiated outward. We wanted to close the market on a high note this year, but now we're worried that the 2006 market will have to deal with this. The next Federal Reserve meeting will be extremely critical. We have to hope this isn't predictive of a recession or a slowing economy.

Historically a flat or inverted yield curve is bad news for the market but I don't think that is the case this time. Buying of Treasuries won't go away when the Fed stops raising rates. The long-end going down just reflects demand for long-term bonds.

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