Money and Financial Markets
Interest rates have dropped slightly over the past month, but the yield curve continues its inversion (short rates higher than long ones), with a curious peak at the six-month maturity. Since last year, short rates have moved up substantially more than long rates, sending the 10-year, three-month and the 10-year, two-year spreads below zero. Because the yield curve frequently inverts before recessions (including the two most recent), a closer look at what’s happening to the yield curve seems appropriate.
Suggested citation: “Money and Financial Markets,” Federal Reserve Bank of Cleveland, Economic Trends, no. 06-10, pp. 05-07, 10.15.2006.