The indicator that heralds impending US recessions is starting to flash — but one huge factor is different this time

AP

• The US yield curve is flattening, driven by ongoing rate hikes from the US Federal Reserve.
• The current spread between US two- and 10-year bond yields is around 40 basis points, and could turn negative in the not-too-distant future. When this has occurred in the past, it’s almost always signaled that a recession will soon follow.
• Westpac has evaluated whether the signals from US yield curve have been altered by QE from major central banks.

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The US yield curve is flattening, driven by ongoing rate hikes from the US Federal Reserve.

The current spread, or difference, between US two- and 10-year bond yields is now around 40 basis points, more than 200 basis points below the level it sat in early 2014.

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