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00:00:01
>> Jobs, wages, and economic growth all doing well these days. But for economy wants, signs of concerns are showing up. Don't know what this is? It's the U.S. Treasury Yield Curve. It charts out what you would make if you bought various U.S. Treasury bonds. Two-year, three-year, five-year, seven-year, ten-year, 30-year bonds.
00:00:19
Normally, shorter term bonds have smaller yields and longer ones have bigger yields, because the longer you lend money, the bigger the risk of not getting paid back. And so investors want more money for that, but shorter data treasury yields have been rising, as longer ones fall, and that's flattening things out on the chart.
00:00:38
And here's the troublesome part. It's the flattest this curve has been since 2007. Reuters correspondent, Kate Duguid, explains why that could be a problem.>> The problem is that every single recession in the United States has been preceded by an inversion of the yield curve. It might not be immediate, there's sometimes a little bit of a lag.
00:00:59
So in 2005, we saw the yield curve invert, two years ahead of the 2007 recession. Yields at the short end of the curve represent investors' beliefs about how fast the Federal Reserve will raise rates. At the long end of the curve, it represents what analysts think will happen with the US economy.
00:01:20
And so, if rate hikes continue to rise while there's a dim view of the economy, the yield curve will flatten and then eventually invert.>> On Wednesday around midday, a two year treasury bond was yielding 2.42%, while a ten year bond was yielding 2.86%.