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U.S. Yield Inversion is a Broken Barometer

Markets

By Jeffrey Viksjo

JP Morgan’s David Kelly, Chief Global Strategist, sees a flatter yield curve by year-end (despite 10-year yields approaching 3.5%), but does not view that as a harbinger of a U.S. recession. Calling the flattening yield curve a “broken barometer”, Kelly points out that we have never had central banks so active on the long-end of the bond market, distorting the meaning of the flatter curve.

In fact, Kelly believes the flatter curve may ultimately hold stimulative effects for the U.S. Consumer, with rates earned on savings (on the short-end of the curve) becoming higher relative to borrowing rates (such as mortgage rates, at the long-end of the curve).



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