OpenMarkets Weekly: The Yield Curve

At a Glance

  • Flattening and steepening of the yield curve has had a correlation with rising and falling equity markets in 2019

Last summer, the yield on long-term U.S. treasury bonds momentarily moved below the yield on short-term bonds. This is what’s known as an inversion of the yield curve, and it’s received lots of attention in 2019.

That’s because an inversion of the curve has preceded every U.S. recession of the last 50 years.  It is now a well known indicator of economic downturns, though as many have pointed out, it is far from a guarantee that a recession is on the horizon.

The yield curve is worth studying for its properties as an economic barometer, but also for its importance for what it says about interest rate and equity markets.

In this week’s OpenMarkets Weekly, Jack Bouroudjian covers the path of the yield curve over the last few months, and the correlating rise and fall of equity indexes.  As the curve has become flatter, equities have sold off, and when the curve steepens, equities have moved to all-time highs.

“A healthy yield curve has become essential for future strength in equities,” says Jack.

Watch the full episode on the yield curve above.

OpenMarkets is an online magazine and blog focused on global markets and economic trends. It combines feature articles, news briefs and videos with contributions from leaders in business, finance, economics and politics in an interactive forum designed to foster conversation around the issues and ideas shaping our industry.

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