Does an Inverted Yield Curve Lead to a Recession?

I am quoted in The Washington Post on whether an inverted yield curve signals an upcoming recession.

David Kass, a finance professor at the University of Maryland, cautioned that the yield curve may not be an accurate predictor of a recession under current conditions. Kass said several recessions in the past few decades have been preceded by Federal Reserve interest rate increases.

That is not the case currently.

Kass said negative bond yields in Europe, in which investors receive nothing for their money, may be pushing investors into U.S. Treasurys.

“Foreign investors may be buying long-term U.S. Treasurys in order to earn a positive return,” Kass said. “This would exert downward pressure on the yield of long-term U.S. Treasury securities.”

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