UOB Group’s Head of Research Suan Teck Kin, CFA, and Senior Economist Alvin Liew comment on the recent inversion of the US yield curve and the likeliness of a recession in the US economy.

Key Takeaways

“The recent flattening of sections of the US Treasury yield curve and “inversion” in a key part of the yield curve has flagged concern given the track record of yield curve inversion foreshadowing US economic recessions.”

“While the yield curve has a reliable track record of preceding US recessions, it had given false signals before and the length of time before the occurrence of a US recession varied significantly from months to years, thus there is a need to treat this with caution.”

“Based on the factors we examined, we think that recession risks remain low in the next 6-12 month horizon. As such, we are maintaining our US growth projections at 3.3% in 2022 and 2.3% in 2023 and we expect the US Fed to continue with its rate hikes in the remaining 6 meetings in 2022.”