Strongest yield curve inversion since 1981: warning sign for US economy?

passers-by on Wall Street

Investors continue to demand higher yields for short-term bonds than for long-dated bonds.

(Photo: Reuters)

Dusseldorf The US monetary policy shift is having an increasingly unusual impact on the bond market. The yield curve of the most important bonds currently shows an extremely inverse relationship – the short-term yields are therefore higher than the long-term, as is usually the case. This is seen as a warning signal for the economy.

The yield curve shows the yields on the bond market across all maturities. Typically, long-term bond yields are higher than short-term bond yields. Because investors expect a higher compensation for the risk they take if they commit to a long-term commitment and thus accept a higher risk of default.

However, this relationship has recently reversed, in this case one speaks of an “inverse interest rate curve”: since the summer, the yield on bonds with a term of two years has been higher than on bonds with a ten-year holding period.

Read on now

Get access to this and every other article in the

Web and in our app free of charge for 4 weeks.

Continue

Read on now

Get access to this and every other article in the

Web and in our app free of charge for 4 weeks.

Continue

source site-13