What’s a flattening yield curve and why it may be scary

Author: , Post Date: March 29, 2018
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What’s a flattening yield curve and why it may be scary
by Matt Egan – March 28, 2018

Excerpt below:

An obscure measure known as the yield curve is flattening. That means the gap between short and long-term Treasury rates has narrowed.

The flattening yield curve signals concern that the Federal Reserve could be hitting the brakes on the economy so hard that it inadvertently puts the United States into another recession.

The yield curve is nowhere near inverting right now, and few economists expect a recession on the horizon. Growth is expected to be strong this year, thanks in part to Washington stimulating the already-healthy economy with tax cuts and extra spending.

Just last month Wall Street was concerned the economy could overheat, creating a burst of inflation the Fed would have to cool off by raising rates aggressively. The 10-year Treasury yield spiked above 2.9%, sending the stock market into turmoil. Investors feared a move above 3% would spark more turmoil.

Now, the shrinking 10-year yield is spooking Wall Street.

“It shows that markets can be fickle,” said David Kotok, chairman and chief investment officer of Cumberland Advisors.

Kotok is watching the yield curve “like a hawk,” but he’s not worried about a downturn yet. He argued that the double whammy of tax cuts and government spending will be powerful enough to offset the Fed tapping the brakes on growth.

“I’m not ready to take this as a recession message,” he said.

What’s a flattening yield curve and why it may be scary

An obscure measure known as the yield curve is flattening. That means the gap between short and long-term Treasury rates has narrowed. The flattening yield curve signals concern that the Federal Reserve could be hitting the brakes on the economy so hard that it inadvertently puts the United States into another recession.

Read the full article at money.cnn.com

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