Why Yield Curves Excel at Seeing the Future and Central Banks Don’t

Yield curves2

Why is the shape of a Yield Curve a solid predictor of a recession (or a recovery)?

I actually have never heard a coherent explanation why a flat or inverted Yield Curves signal recession so well. Typically 99% of answers to that question would center around what a Central Bank of a country would do and what investors think about its possible moves.  It has some validity but the argument is incomplete. Continue reading “Why Yield Curves Excel at Seeing the Future and Central Banks Don’t”

Why Yield Curves Excel at Seeing the Future and Central Banks Don’t