Yield Curve Indicator Still Waiting For A Recession

2025-01-13 22:35:00 ET

Summary

• The U.S. 2-/10-year slope inverted in mid-2022, and we are still waiting for the recession that was allegedly predicted by the yield curve.
• For those of us who are not yield curve maximalists, we can argue that the yield curve roughly predicted what it is supposed to: an end to the Fed rate hike campaign as well as cuts.
• The problem for bond bulls is that the cuts were relatively mild, and as Friday’s labour market report showed, the economy remains resilient.
• The fragile state of the Canadian economy has left the Canadian 10-year yield much lower (at the time of writing, 3.5%).

The U.S. 2-/10-year slope inverted in mid-2022, and we are still waiting for the recession that was allegedly predicted by the yield curve. At this point, the yield curve maximalists have to be hoping for a recession triggered by a trade war in the coming months. At which point, the maximalists will argue that the yield curve predicted the trade war in 2022 the same way it predicted COVID-19....

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