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Wed Aug 14, 2019, 02:51 PM

Janet Yellen says yield curve inversion may be false recession signal this time [View all]

Former Federal Reserve Chairman Janet Yellen said the markets may be wrong this time in trusting the yield curve inversion as a recession indicator.

“Historically, it has been a pretty good signal of recession, and it think that’s when markets pay attention to it, but I would really urge that on this occasion it may be a less good signal,” Yellen said on Fox Business Network. “The reason for that is there are a number of factors other than market expectations about the future path of interest rates that are pushing down long-term yields.”

The yield on the benchmark 10-year Treasury note was at 1.623% on Wednesday, below the 2-year yield at 1.634%, causing the bond market’s main yield curve to invert and send markets plummeting. The bond market phenomenon is historically a trusty signal of an eventual recession; however, Yellen said this time may be different.

When asked if the United States is headed into a recession, Yellen said “I think the answer is most likely no. I think the U.S. economy has enough strength to avoid that, but the odds have clearly risen and they’re higher than I’m frankly comfortable with,” she said.

https://www.cnbc.com/2019/08/14/janet-yellen-say-yield-curve-inversion-may-be-false-recession-signal-this-time.html

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