An inverted yield curve historically is associated with an impending recession.
But that’s now how Treasury Secretary Steven Mnuchin sees it, telling Maria Bartiromo on Fox Business Network that he doesn’t see any signs of a recession.
The most popular way of measuring the slope of the yield curve, the difference between the 10- and 2-year yields, on Monday wasn’t inverted, with the 2-year TMUBMUSD02Y, -0.34% yielding 2.385% and the 10-year TMUBMUSD10Y, -0.51% yielding 2.556%.
Yields are typically higher at longer maturities, due to the risks associated with time.
However, the yields on some even shorter maturities were higher than the two- to five-year range. The yield on the 3-month Treasury bill TMUBMUSD03M, -0.11% for instance, was 2.424%. The 10-year yield briefly fell below the yield on the 3-month bill at the end of March — that measure is viewed by economists as the most reliable harbinger of recession a year or more in advance.
Minutes from the Federal Open Market Committee meeting that ended March 20 show that there were at least some at the Federal Reserve who agree with Mnuchin.
“Several participants expressed concern that the yield curve for Treasury securities was now quite flat and noted that historical evidence suggested that an inverted yield curve could portend economic weakness; however, their discussion also noted that the unusually low level of term premiums in longer-term interest rates made historical relationships a less reliable basis for assessing the implications of the recent behavior of the yield curve,” the minutes said.
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