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Economic Viewpoint

Flirting with a Flat Yield Curve

March 15, 2022
Royce Mendes
Managing Director and Head of Macro Strategy

In the eyes of many, flat yield curves just aren’t what they used to be. What was once the gold standard for predicting recessions has lost some of its shine. It’s true that as central banks have hoovered up much of the outstanding government bond supply in recent years, signals from yield curves have become more scrambled. But we shouldn’t dismiss them completely. The yield curve’s track record can’t be ignored. Even in the last economic cycle, when central bank balance sheets were already bloated, the flattening accurately predicted that US policy rates would need to be lowered.

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