Economics
Fed Paper Questions ‘This Time Is Different’ Yield Curve Theory
- Some say term premium could limit signal value of an inversion
- Study shows inversion predicts slump, regardless of the driver
This article is for subscribers only.
The Federal Reserve Bank of San Francisco has bad news for those declaring an inverted yield curve is no longer a recession predictor.
Adjusting for the compensation investors demand to hold longer-dated bonds doesn’t invalidate the curve’s prognosis powers, according to a new research post published Monday.