When the yield curve flattens and eventually inverts, you worry. But it’s when a recession hits, the Fed cuts rates and the curve steepens that you become s**t scared. Yield curve dynamics represent a crucial macro variable, as they inform us on today’s borrowing conditions and on the market future expectations for growth and inflation. An inverted yield curve often leads towards a recession because it chokes real-economy agents off with tight credit conditions (high front-end yields) which are reflected in weak future growth and inflation expectations (lower long-dated yields). A steep yield curve instead signals ... (full story)