Trade policy and the yield curve
Can trade policy contribute to the flattening of the yield curve? Yes, argues Menzie Chinn as long as tariffs increase prices and depress consumption, retaliation depresses exports, rising protectionism hits financial markets and increases uncertainty.
The Trade Policy Annotated Yield Curve
By: Menzie Chinn – University of Wisconsin–Madison
Why is the US yield curve flattening?
Given the global integration of capital markets as yield inversions are happening overseas could it be that overseas inversions are making their way into the US yield curve? Or is the current flattening engineered by the FOMC which plans to have its short-term interest rate target range at 3.00 – 3.25 by the end of the 2019?
The Treasury Yield Curve Blues
By: David Beckworth – George Mason University
Much ado about nothing
The current flattening, argues Stephen Williamson, is caused more by long bond yields moving down than by short term term rates moving up. It’s the latter that is the true indicator of an upcoming recession. Why so much concern then?
The flattening yield curve is being used as an argument for a pause in interest rate hikes, so the people in favor of more interest rate hikes are looking for reasons why things are different now, and the drop in the margin between the 10-year yield and the 2-year yield doesn’t mean what it used to. People may be able to come up with explanations about what’s going on with respect to the 10-year vs. the 2-year Treasury bonds, but as I discussed above, that’s not really important – it’s what’s going on at the short end of the yield curve that matters.
Don’t Fear the Inversion – It’s the Short Rate That Kills You
By: Stephen Williamson – Federal Reserve Bank of St. Louis
…what if the near-term spread may only predict recessions because it impounds expectations that market participants have already formed?
(Don’t Fear) The Yield Curve
By: Eric Engstrom and Steven Sharpe – Federal Reserve Board
