The Yield Curve

In Its Different This Time Redux Barry Ritholtz discusses the shape of the yield curve. The Deustche Bank believes that the shape of the yield curve, the slope between the Feds fund rate and the 10-year Treasury note, no longer accurately predicts the growth in real GDP. Barry's main focus, however, is not to worry about whether or not the yield curve accurately predicts growth in real GDP, but rather to note when the yield curve becomes inverted, because that is an indication of a coming recession. And when there is a coming recession: Sell.

I have bookmarked an interesting website Dynamic Yield Curve. Hit the animate button and you can see how the yield curve has changed over the past seven or eight years. Note how the yield curve has begun to flatten recently. Will it soon invert, however, is the real question.