The following is an excerpt from Ian Talley | June 27, 2016 | WSJ.com |
Record-low yields on U.S. Treasurys have for decades signaled weakness in the U.S. economy and foreshadowed recession. Not this time.
Some economists are pointing to the so-called yield curve—the difference between long-term and short-term rates—as a harbinger of a new slowdown. Yields on 30-year and 10-year Treasurys plumbed record depths earlier this month, setting fresh milestones in three-decade downward trends.
Yields have since retreated a bit from their lows. But combined with weak business investment, falling corporate profits and slipping auto sales, the slump in bond yields has led some investment banks to put the risk of recession as high as 60%, accounting for past yield-curve compressions that were followed by recessions.
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