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14 Reasons Why An Inverted Yield Curve Isn't The End Of The World

This article appears courtesy of Institutional Investor

Source: InstitutionalInvestor.com

Dave Hoffman


The cliffhanger ending of 2005 was whether the inverted yield curve between the two and 10-year treasury bonds is reason to believe that a nasty recession lies ahead. Historically – or, to be precise 60 per cent of the time - an inversion has predicted a recession within one year. InstitutionalInvestor.com took matters into its own hands and asked analysts, economists and asset managers whether today's inverted curve really is a harbinger of impending economic doom and gloom. The varying opinions, 14 of them in all, were stark contradictions to a looming recession. Some were actually downright cheery.

 

 

                1.       Spikes in foreign investments and an increase in investments in derivatives and hedge funds are helping to stabilize the economy. "Rates are low and attractive relative to rates around the world," says Margo L. Cook, CFA, managing director and head of institutional fixed income management for BNY Asset Management, The Bank of New York. "There has been a pretty good demand for U.S. assets. Unless inflation spikes, there should be low nominal rates."

           

                2.


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