Inverted Yield Curve and its impact
In the last article Understanding the Yield Curve we understood the basics of the yield curve; let’s focus more on the current situation wherein the G-sec yield curve in India has inverted significantly.
Yield Curve is a leading indicator of the economy & a good predictor of future economic activity.
Steep Yield Curve i.e. Positive spread between shorter and longer duration papers is generally followed by period of stronger growth and lower volatility, whereas inverted yield curve, where the yield on shorter duration papers is higher than longer ones, is followed by poor growth and recession.