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  • KPB & Co Research

US Government Yield Curve 2006 to 2019

Since the US federal reserves intensified the pace of rate increases, and accelerated the run off the bond buying program in late 2017, there have been a marked slowdown in the US economy, and a continued flattening of the US yield curve. Today, the yield curve is inverted at the 0 to 5 year tenors, indicating that the market believes that there might be rate cuts in the next 5 years or less. Rate cuts may occur in the future if the US federal reserves see evidence of a rapid slowdown in the US economy.

Our motion graph show that the yield curve has flattened substantially, and also that yield curve looks similar to that of 2007, which is the year before the great recession rocked the world.

In the interim, US economic growth has so far been stellar. At the same time there have been relatively moderate inflationary pressures, with significant a signs of slowdown in manufacturing activity, and trade. Part of the slowdown in economic activity does stem from actions taken by the US government to tilt the scale of trade back in their favour. In this regard, a reversal of course could turn economic sentiments slightly positive. In addition, the US federal reserves in a 180 degree turn, has changed their tone to a more accommodative stance. They have signalled that there will be no further rate hikes in the next 2 years or so, and that the balance sheet run-off will end in September this year.

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