It’s called the U.S. Treasury yield curve and, when inverted, is considered to be the most reliable indicator of an upcoming recession.
The yield curve model was originally developed by Canadian economist Campbell Harvey while he was completing his dissertation.
In the three recessions since his dissertation was published, including the 2008 financial crisis, the curve was inverted before each one.
Harvey is “very confident” the current inverted curve could be indicative of another recession on the horizon.
The U.S. Treasury yield curve describes the relationship between treasury interest rates and the maturity of treasury bonds.
However, other economists caution consumers not to disregard other economic indicators entirely in favour of the yield curve.
“If everybody is looking at this indicator and says, ‘Well, the curve is inverted; we’re going into recession. »