Why yield curve steepens before recession?

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optimum
Posts: 2
Joined: Sat Jun 27, 2020 2:19 am

Why yield curve steepens before recession?

Post by optimum » Tue Jun 30, 2020 2:26 am

I noticed that once yield curve is inverted, it steepens again before a recession. I couldn't find any explanation for that. what would be the reason?

https://fred.stlouisfed.org/series/T10Y2Y

Fortune Seeker
Posts: 44
Joined: Mon Apr 13, 2020 9:52 am

Re: Why yield curve steepens before recession?

Post by Fortune Seeker » Tue Jun 30, 2020 3:25 am

I think Aswath Damodaran mentioned this in one of his blog posts.

He said that was usually caused by movement in short term yields which are caused by government's interventions. Short term rates go lower -> steeper yield curve.


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