The two main reasons he cites are the potential for an escalation of the conflict between Israel and Hamas, and subpar fiscal conditions in the United States. While an inverted yield curve wasn’t included in Tudor’s comments, it’s yet another important factor for investors to consider., Jones mentioned the factors he’s keeping an eye on with regard to the Israel-Palestine conflict before deciding that market uncertainty has been reduced.
One of the greatest predictors of recession historically has been the yield curve. Every recession since 1955 has been preceded by anIn July, the 2s/10s yield curve for US Treasuries hit a low of 109.5 basis points . This level had not been seen since 1981. While this inversion has since steepened, things still look bad from the perspective of shorter duration Treasuries.
A flatter yield curve compresses margins for banks because it limits their ability to borrow cash at lower rates while lending at higher rates, which can lead to restricted lending activity and a resulting economic slowdown. It also means that investors are less optimistic about the near-term future of the economy, as they sell shorter duration debt, causing yields to rise.attempt to fight inflation by raising rates at the fastest pace in modern history has also played a role.
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