Treasury yield curve may be back to normal but U.S. economy is not

A closely watched part of the U.S. bond market that is widely viewed as a recession indicator has recently stopped flashing red. But investors and economists say the economy is still not in the clear.

The so-called “inverted yield curve,” in which yields on short-term bonds are higher than those on long-term bonds, reverted back to normal on October 11. The shift could be interpreted as a sign that investors are feeling more optimistic about the economy.

But there are also some technical reasons for the move, leading some experts to caution that the economy may still be fragile.

“There’s no guarantee that we are in the safety zone,” said Nikol Hearn, a macro strategist with TS Lombard. “There’s so much that can happen within the next few years.”

Yields on longer-term…

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