You may or may not already have heard that the U.S. treasury yield curve is at its flattest since 2007 – the year before the 2008/09 Global Financial Crisis. Is this a potential sign of things to come?
But before I delve into that, I guess a bit of background information is in order.
What is the yield curve?
The yield curve shows the spread (difference) between the interest rates of short-term and long-term U.S. Treasury bonds. For example, the current interest rate for the 10-year U.S. Treasury bond is 2.83% and the interest rate for the one-year U.S. Treasury bond is 2.33%, therefore the spread is 0.5 percentage points.
Usually, interest rates for long-term bonds are higher than for short-term bonds. And rightly so because investors demand a higher yield for locking their money away for a longer period of time, which …