The inverted yield curve -- where the US 2-year note yield has risen above the benchmark 10-year yield for the first time 12 years – is fueling fears that the global economy may be heading for recession in the next 12 months. This is because the inverted yield curve is an indicator which has correctly predicted seven recessions since 1960. The only time the inverted yield curve sent a false signal was in 1966.
The US recession warning from the treasury market may prompt the US Federal Reserve to cut rates more than once during the remainder of this year. The Fed rate cuts are likely to pressure other central banks to follow suit by implementing additional monetary policy easing as well.