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Arcane Piece of Data Used to Predict Next US Recession

Ken Bredemeier

   WASHINGTON - When U.S. economists and stock market analysts ponder
   whether an economically debilitating recession is on the horizon, they
   often look to an arcane piece of data: whether a yield curve inversion
   of interest rates on government bonds is occurring. It's called an
   inverted yield curve.

   Specifically, they look at the interest rates for two- and 10-year U.S.
   Treasury notes.

   Typically, interest rates on longer-term government bonds are higher
   than those for shorter periods of time.

   But when that interest rate phenomenon is reversed, as occurred
   Wednesday, it can be a sign that investors have worries about the
   immediate state of the U.S. economy, the world's largest, and are
   demanding a higher rate of return on the shorter-term notes.

   The yield on a 10-year Treasury note briefly hit 1.622%, dropping below
   the 1.634% yield for a two-year bond, although the longer-term yields
   moved higher in later trading compared to that for the two-year notes,
   and remained higher in early Thursday trading.

   Despite Wednesday's yield curve inversion, former Federal Reserve chair
   Janet Yellen said she does not think the U.S. is headed to a recession.

   "I think the U.S. economy has enough strength to avoid that," she said.
   "But the odds have clearly risen, and they are higher than I'm frankly
   comfortable with."

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