A Deeply Inverted Yield Curve Sounds Recession Alarm

The slope of the U.S. yield curve has been among the best recession predictors historically, but after inverting in 2022, the U.S. has not seen a recession yet. Now, the signal is testing the lows of 2023, suggesting an even greater chance of recession over the coming 12 months. Is the signal simply wrong, or could a recession be on the way?

The Term Spread

The U.S. Treasury market is taken seriously by investors for its size and liquidity. Typically the yield curve slopes upward as longer-dated bond maturities earn higher yields.