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Yield Curve Indicates Rising Recession Odds, Cleveland Fed Says

By Daniel Kruger

Sept. 23 (Bloomberg) -- The narrowing premium Treasury investors demand to hold longer-term government debt signals a rising chance the economy will slip into another recession, according to the Federal Reserve Bank of Cleveland.

The probability the economy will begin contracting was 18.5 percent in August, compared with 12.4 percent in June, Joseph G. Haubrich, head of banking and financial institutions research at the Cleveland Fed, and Timothy Bianco, a researcher, wrote in a report published today. They cited a drop in the difference between 10-year note yields and 3-month bill rates to 2.45 percentage points in August from 3.17 percentage points in June.....