Inverted Yield Curve Signals Caution, Even if Recession Remains Distant

Head of U.S. Securitized Products John Kerschner and Co-Head of Global Credit Research John Lloyd discuss the inverted yield curve and its implications for bond investors.

Key Takeaways

  • While recessions have historically been preceded by an inverted yield curve, the time to recession has varied widely; unprecedented central bank intervention into markets makes the timing even harder to predict this time around.
  • It is worth questioning whether the curve has inverted because investors think the fed funds rate is too high for the path of future growth, or because investors are turning to U.S. Treasuries in a yield-starved global environment.
  • There are still yield opportunities to be found; however, we do not believe investors are getting paid to stretch for yield in this uncertain environment.