Potential recession signal: A key 'yield curve' has inverted.
FILE- In this March 13, 2019, file photo traders gather at the post that handles Oaktree Capital Group on the floor of the New York Stock Exchange. The U.S. stock market opens at 9:30 a.m. EDT on Friday, March 22. One of the most closely watched predictors of a potential recession just yelped even louder.
It seems illogical. Economists call it an "inverted" yield curve. Normally, short-term debt yields less than a long-term debt, which requires investors to tie up their money for a prolonged period. When a short-term debt pays more than a long-term debt, the yield curve has inverted. Shorter-term rates, by contrast, are influenced less by investors and more by the Federal Reserve, which raised its benchmark short-term rate seven times over the past two years. Those rate hikes had been forcing up the three-month yield, to 2.46 percent from 1.71 percent a year ago. This momentum will likely slow now that the Fed foresees no rate hikes in 2019. But if longer-term Treasury yields continue to weaken, the curve could remain inverted.
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