Key insights

• Conventional wisdom suggests that U.S. recessions usually follow an inverted yield curve. However, we should be wary of assuming this applies today.
  

• Our analysis suggests that when government debt on a central bank’s balance sheet exceeds 10%, an inverted yield curve loses its predictive power.

• As such, we believe investors should put greater weight on macroeconomic fundamentals when assessing the risk of recession in the current environment.

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Do Yield Curve Inversions Still Predict Recessions in the Age of QE?