The best way to look at the bond market as a means for divining the economic future suggests the U.S. economy isn’t heading toward an imminent downturn, according to a report on Monday from the Federal Reserve Bank of San Francisco.
The paper sought to extract a message from the bond market’s yield curve, which maps yields from the shortest- to longest-dated Treasury security. When the normally positive difference between the shortest and longest maturities turns negative—an inversion, in the parlance of the market—it almost always happens before a recession.
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