M&G: Yield curve inversion may signal need to cut US rates again in near term

Traditionally a signal of recession

Stuart Canning, research analyst at M&G Investments, has said the temporary yield curve inversion which saw three-year Treasury yields lower than two-year notes is a signal that interest rates in the US may need to come down in the near-term.

On Tuesday, three-year Treasury yields fell below two-year notes for a brief moment before bouncing back. This has set off a debate among bond investors as to the meaning of the inversion, with one camp arguing it is mainly symbolic while others claiming it indicates a recession is near. The US Treasury yield curve inversion has been a classic indicator of an oncoming recession in history such as in the build-up to the Global Financial Crisis in 2007 and in advance of the recessions in 1990 and 2001. Despite the usual signal coming from two-year and 10-year Treasury yields, Canning...