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SCHO - Would The 'Infallible' Message Of The Yield Curve Please Stand Up? A Comment On The Conundrum Of Forecasting
Schwab Short-Term U.S. Treasury
Everyone knows the message of the yield curve, right? An inverted yield curve is an absolutely reliable indicator that a recession is coming in about 12 to 24 months. A positively sloped yield curve means that no recession is on the horizon.
So riddle me this: what does it mean when one relatively small portion of the yield curve inverts, and stays inverted, while another part steadfastly refuses to invert?
In other words, we seem to have two equally infallible but contradictory signals.
Let’s go to the graphs. Here’s the 5 year minus 2 year