A steepening in the yield curve after an inversion typically indicates a recession is imminent. But this time is different: the curve’s rise is not indicating a near-term downturn. In fact, leading indicators show the risk of an NBER recession over the next 3-6 months is falling.
The yield curve in this cycle has become a monumental red herring. First, the longest curve inversion ever seen has yet to lead to a recession; and second, the recent steepening is not the omen it has been historically.
