On this page we examine the history of the relationship between long term and short term government debt yields in the United States. Since the yield curve is a curve (ha) we’re showing the difference between just two points: short term and long term debt. Indeed, the inverted yield curve is an anomaly happening rarely, and is almost … Right now it’s only the 3-month to the 10-year section of the curve. Since then it's been a reliable sign of an impending recession - even using the imperfect blended measure we came up with for this post. In the next post we'll look at timing with the inversion and what it all means - and clean up the data to release to you folks to do your own work. If you’re interested in the detailed price analysis and price projections with targets, we invite you to sign up for our Gold & Silver Trading Alerts. It’s free and if you don’t like it, you can easily unsubscribe. We're especially interested in when the yield curve inverts - or short term borrowing costs exceed longer term costs. On the other hand, unified data on historical short-term US borrowing costs is hard to come by online. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. An inverted yield curve means investors believe they will make more by holding onto a longer-term Treasury than a short-term one. We invite you to. But it is probably the best one we have. The yield curve is not an ideal recessionary indicator. He is also a Laureate of the 6th International Vernon Smith Prize. The chart above shows the yield curve for the start of the year vs. yesterday. This article pulls the series back to January of 1871 by merging data on various short term debt instruments and comparing them to the 10-Year US Treasury Yield. Chart 2: Yield curve (spread between US 10-year and 3-month Treasuries, monthly averages, data retrieved from the New York Fed, in %) in 2019. The final adjustments, for your consideration: To translate: these are quick cuts, not graduate thesis-level adjustments to blend these rates. Pictured above is the 10Y – 3-6 Mo US yield difference from January 1871 through April 30, 2018. Chart 1. While we speak of 7-10 year business cycles nowadays, recessions used to be quite common in the United States. Today, the 30-year If you enjoy the above analysis, please also check out other services dedicated to the precious metals investors. Gold Price Forecast: Thin Line Between USD Bottom And Gold Top, Gold Price Forecast: January Could Taste Sour For Gold, Gold Price 2021 Forecast: Continuation Advance Ahead, Fresh insights on Gold, precious metals, & the economy, Fresh insights on Gold, precious metals, and the economy. A recession is coming! The yield curve has inverted before every U.S. recession since 1975, although it sometimes happens months or years before the recession starts. Since the yield curve is a curve (ha) we're showing the difference between just two points: short term and long term debt. Indeed, this key indicator is now flashing red light warning. A Data Study [PDF]). As one can see, that difference is still negative (as of July 19). Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The last time the yield curve inverted was at [a] when short-term yields were above 6.0%. Increase the "trail length" slider to see how the yield curve developed over the preceding days. As one can see, the probability of a recession in America twelve months ahead is 32.88 percent, an important jump in recessionary odds from 12.51 percent one year ago and from 29.62 percent in May 2019. If you enjoyed the above analysis and would you like to know more about the fundamentals of the gold market, we invite you to read the August Gold Market Overview report. The first one displays the recessionary odds derived from the yield curve and is calculated by the New York Fed. It means that the yield curve remains inverted (on a daily basis) since May 2019 (we abstract from the short-lived dip in March 2019). 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