Don’t Get Caught Behind the (Yield) Curve

As the bond yield curve’s inversion deepened last week, news items popped up for the second time in a month with speculation as to whether it was a sign of a coming recession. If that sentence made your eyes start to glaze over, hang on. A brief visit to AAII archives and you’ll be up to speed on what it all means.

To explain the rare phenomenon of yield curve inversion and its connection to recessions, we went straight to the source and interviewed Duke professor Campbell Harvey. He was the first to publish research showing that recessions were preceded by the yield on the 10-year Treasury bond falling below the yield on the two-year Treasury note. (Normally, this yield curve slopes upward, with short-term bonds yielding less than long-term bonds.) You can read Harvey’s enlightening conversation with our editor Charles Rotblut in the article Bond Yields’ Role as a Recession Warning Signal.

However, if you’re new to the term yield altogether, start with What’s in a Yield? from the AAII archives. The term is used in myriad ways, and this article gives clear definitions. Then, head over to the Investor Classroom on bonds, where you can learn the ins and outs of bond yield in a step-by-step fashion.

When you are ready for more in-depth study on what makes bonds tick, turn to our three-part series. It comes complete with a downloadable spreadsheet that you can play with. It was written in 2012 and 2013, but the concepts are timeless. Find out how to determine bond price volatility, how to calculate bond prices and returns and learn about the important concepts of bond duration and convexity.

Whatever your investing knowledge, AAII can help you reach a new level of understanding and keep up with the news.

If you want to become an effective manager of your own assets and achieve your financial goals, consider a risk-free 30-day Trial AAII Membership