Recently, the news has been littered with headlines about an inverted yield curve, long seen as a strong indicator of oncoming economic recession in the United States.
The headlines were prompted specifically by the inversion of the 3-month/10-year yield curve. It seems to be too early, on a fundamental basis, to have grave concerns about an imminent US recession, though.
In fact, the 3-month/10-year yield curve only inverted for a few days before returning to a positive reading.
Added to this, a 3-month yield is an unnaturally short maturity to consider in the context of a potential US recession. Historically this curve provided the market with an early warning of, on average, 22-months. That would imply a predicted recession in the first quarter of 2021, if the curve were to invert from here on a sustainable basis, which it shows no signs of doing yet. This does not raise the immediate alarm bells the financial press would have us hear.