Yield Curve Inversion as a Recession Indicator
On March 31, 2022, the yield curve for US treasuries briefly inverted for the first time since 2019. Investors see this as a warning signal because a yield curve inversion has preceded every global recession in the last 50 years. This article dives into the underlying mechanisms of yield curve inversions and describes the historic development of the yield curve as an economic indicator. Furthermore, arguments for the position that this time is different, as the extraordinary nature of the current economic cycle may have broken the historic link between yield curve inversions and recessions, are presented.