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Is The U.S. Yield Curve Signaling A U.S. Recession?

Published Sat, 30 Mar 2019 15:47:42 -0400 on Seeking Alpha

There has been a lot of talk the past few years about the flattening of the US yield curve - which is a graphical representation of the spread between short- and long-term interest-rate instruments. More recently, some market commentators have focused on the inversion of one part of the curve - and what it means.
As we mentioned in a prior article, when spreads between short- and long-term rates narrow, it typically suggests the market believes economic growth is not sustainable and will fall in the future.
When the spreads between short- and long-term rates turn negative, or invert, it has been seen as a signal a potential US recession may be looming. As the chart below shows, on March 22, the gap between 3-month Treasury bills and 10-year Treasury notes inverted for the first time since 2007.

US Yield Curve as a Recession Indicator The more widely followed part of the US yield curve is arguably the spread between 10-year and 2-year Treasury notes. As Ed Perks, CIO of Franklin Templeton Multi-Asset Solutions, points out in this article, when that part of the yield curve has inverted in the past (falls below zero), US recessions have generally followed.
In the past two years, the spread between 10-year and 2-year Treasury notes has hovered below 100 basis points.1 And, as the chart below shows, it narrowed to as low as 11 basis points in December 2018.

Why the Yield Curve Flattens or Inverts Meanwhile, various fundamental factors have kept a lid on... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
CORNERSTONE TOTAL RETURN FUND 11.49   0.0 0.00 2.74 22.16
ZWEIG FUND 10.89   0.0 0.00 1.44 13.33
LIBERTY ALL STAR EQUITY FUND 6.54   0.0 0.00 0.82 9.94
PROSHARES ULTRAPRO SHORT S&P 500 26.34   0.0 0.00 0.00 2.22
SPDR DOW JONES INDUSTRIAL AVERAGE ETF TRUST 272.27   0.0 0.00 5.63 2.06
PROSHARES ULTRASHORT S&P 500 29.63   0.0 0.00 0.00 1.93
SPDR S&P 500 ETF 298.83   0.0 0.00 5.42 1.81
POWERSHARES QQQ TRUST SERIES 1 191.01   0.0 0.00 1.49 0.78

CORNERSTONE TOTAL RETURN FUND - CRF
CORNERSTONE TOTAL RETURN FUND - CRF  


Older articles featuring Cornerstone Total Return Fund (CRF):
Negative-Yielding Debt: Monetary Contagion Spreads
The Dollar, High-Yield Bond Market And S&P 500 Revenue Growth
Two Yield Spreads Are Better Than One For Business Cycle Analysis
Equity CEFs: Where's The Beef In The Delaware Dividend & Income Fund?
Of Slopes And Flops: The Yield Curve Inversion
When A Yield Curve Inversion Means Recession
Ignore The Yield Curve, They Said...
Short And Sharp: Yield Curve Inversion - A False Positive?
Weekly Edge: Yield Curve Sends Mixed Signals
Why An Inverted Yield Curve Is Important

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