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Is the Flattening Yield Curve a Cause for Concern?

Though it may not be signaling that a recession is imminent, the Fed should proceed with caution

Morningstar 04.07.2017

The yield curve has flattened in 2017. As you can see from the chart below (Exhibit 1), short-term yields have risen from where they started the year, while long-term yields are lower than they were in January. In a "normal" yield curve, the short-term yields are lower than long-term rates, because you would expect to be compensated for taking on more risk in the form of longer bond maturity.

Exhibit 1: US Treasury Yield Curve

201706 credit ch 1

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