Chart of the Week
Monetary tightening by the Federal Reserve since the start of 2022 has prompted a sharp rise in short-term rates and a slower rise in long-term rates. This caused the yield curve to flatten and then invert, with the front end higher than the back end.
Since September 2023, while long-term rates have continued to move upwards, short-term rates have remained broadly stable. The result is a less steeply inverted yield curve as the 10-year Treasury yield rises against its 2-year equivalent. In the past, this situation has been a leading indicator of recession, as illustrated by our graph below.
OUR ANALYSIS
Monetary tightening by the Federal Reserve since the start of 2022 has prompted a sharp rise in short-term rates and a slower rise in long-term rates. This caused the yield curve to flatten and then invert, with the front end higher than the back end.
Since September 2023, while long-term rates have continued to move upwards, short-term rates have remained broadly stable. The result is a less steeply inverted yield curve as the 10-year Treasury yield rises against its 2-year equivalent. In the past, this situation has been a leading indicator of recession, as illustrated by our graph below.
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Written on October 20, 2023. This is not an investment advice. Opinions subject to change.
See also: https://latribune.lazardfreresgestion.fr/en/united-states-tougher-credit-standards-for-small-businesses/
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