As a follow-up to my recent post about recessions and the yield curve, reader Joan F. points us to a piece by the FT’s James Mackintosh. The money quote:
[T]hose keeping faith in recovery also point to the fact that the yield curve has not inverted – 10-year bonds still yield 2 percentage points more than two-year bonds. Given that the 10-year yield has dropped below the two-year (and the three-month) before every recession since the second world war, perhaps a double dip is not looming.
Unfortunately, a quick glance at Japan suggests that once short-term rates hit the floor, the yield curve may no longer be a valuable indicator. While it warned of the recession that followed the bursting of Japan’s bubble, it missed the three recessions since.
I wanted to contact Donald Sr. I’m a friend from his youth.