What the curve signals

An inverted curve says markets expect rate cuts. The near-term part of the curve carries the signal, not the long end.

• Macro and rates

1 idea that carry it

• FrameworkMacro and ratesResearch

  The near end of the curve carries the recession signal, not the long end

  An inverted curve is the market expecting cuts; read the near-term forward spread, because the long spread is diluted by the term premium.

  Rates, macro and sales and trading interviews, and any time a headline says the curve has inverted.

  From (Don't Fear) The Yield Curve · Eric Engstrom and Steve Sharpe, Board of Governors of the Federal Reserve System (FEDS Notes)