Jason Coyle, Mark DeCicco, Luke Ditton, Jagger Doll, Katrina Eggleston Inversion Alert Jason Coyle, Mark DeCicco, Luke Ditton, Jagger Doll, Katrina Eggleston Section B; Group C

Bonds Represent the debt between an investor and a corporation/government Safe and reliable investment Have better interest rates than banks do Short Term Bond 1 Month Bill - 10 Year Note Carry Lower Yield=Less Risk Long Term Bond 15-30 Year bond More Yield=Higher Risk due to inflation

“Yield curve is a way to measure a bond investors’ feelings about risk”- Fidelity

Yield Curve https://www.wsj.com/market-data/bonds

What it means to invert The yield for a shorter term bond is larger than a long term bond Investors have little confidence in the near future economy because they see it as riskier A quick inversion could be just a part of the market trend Some inversions have not preceded recession

Why the U.S. and other countries have it Map of the economy Indicator of possible recessions, inflation, etc

List of regions with Yield Curves Australia Belgium Bulgaria Canada Costa Rica China Finland France Germany Great Britain Greece Hong Kong Italy India Indonesia Japan Korea Malaysia Netherlands New Zealand Norway Pakistan Philippines Romania Russia Singapore Slovakia South Africa Spain Sweden Switzerland Thailand United States Vietnam

What other signs usually follow it? Federal Funds Rate cut Operating Costs Rise Execs “shelve investments” Higher % Dedicated to Paying off Debt Increase in Temporary Employment Less confidence Unemployment Rises Other Countries’ Economies Slow Federal Funds Rate cut Credit Crunch Consumer Borrowing Costs rise Operating Costs Rise Execs “shelve investments” Adjustable-Rate Mortgage Rates increase Higher % Dedicated to Paying off Debt Less Expendable Income Spending Slows Hourly Workers Hours cut Increase in Temporary Employment Less confidence in future Jobless Claims for Unemployment Benefits Unemployment Rises Other Countries’ Economies Slow Housing Prices Fall

What the Past Tells Us A “2-10” inversion has preceded every recession since 1950 Downturn may not happen as late as 34 months after, 22 months on average Markets rally 15% after inversion on average Last happened in June 2007 Fed cut rates starting Sept. ‘07 In 11 of 13 cases, Fed lagged in cutting rates After an inversion, lenders tend to tighten credit standards Is less lending the cause? Date of inversion Start of recession Number of months 09/17/1978 01/02/1980 15.5 09/12/1980 07/01/1981 10 08/11/1989 07/01/1990 11 02/02/2000 03/01/2001 13 02/01/2006 12/01/2007 22

Links https://www.cnbc.com/2019/08/14/the-inverted-yield-curve-explained-and-what-it-means-for-your-money.html https://www.washingtonpost.com/business/2019/08/14/recession-watch-what-is-an-inverted-yield-curve-why-does-it-matter/ https://www.investors.com/news/economy/inverted-yield-curve/ https://www.reuters.com/article/us-usa-economy-yieldcurve-explainer/explainer-countdown-to-recession-what-an-inverted-yield-curve-means-idUSKCN1V320S https://www.bankrate.com/personal-finance/smart-money/watch-these-indicators-know-when-recession-could-be-coming/ https://www.forbes.com/sites/simonmoore/2019/08/20/what-key-recession-indicators-are-telling-us-today/#7fd4d3382156 https://www.investopedia.com/investing/bond-advantages/ https://www.fidelity.com/learning-center/investment-products/fixed-income-bonds/bond-yield-curve https://www.investopedia.com/terms/b/bond.asp https://markets.businessinsider.com/news/stocks/yield-curve-inversion-explained-what-it-is-what-it-means-2019-8-1028482016 https://www.forbes.com/sites/leonlabrecque/2019/03/29/recessions-and-yield-curve-inversion-what-does-it-mean/#1f3e78145890