Is the yield curve broken?
November 29, 2008 4:11 PM Subscribe
MoneyFilter: Help me understand the Treasury yield curve.
According to Mutant
and others, US Government Securities Yield Curve is an excellent predictor of the future of the U.S. economy. Specifically, an inverted yield curve
(the rates on short term Treasury bills are higher than the rates on long term Treasuryy notes) is supposed to be very good
at forecasting trouble ahead.
, in the midst of all this turmoil in our economy, the spread between 3-month T-bills and 30-year notes is more than 3 percent, which some
call a sign of economic health. But this defies common sense, because we're headed for a recession. Or are we?
Shouldn't the yield curve be flat or inverted now? Is something keeping short-term rates from rising (or their prices from falling)? What's happening here?