As we remind our readers often, yield curves are one of the single best leading indicators.  A yield curve inversion has predicted every US recession since 1945, with only one false positive, in 1966 (although the false positive preceded a downturn in industrial production and a 25% decline in the DJIA).  If you were a castaway on a desert island and you could only take one economic indicator with you, then you would take the yield curve.  Last year, not one major economy’s yield curve steepened, and the pattern is continuing into this year.

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As the charts above show, almost all major yield curves have flattened over the last 50 weeks.  This is despite many central banks cutting or being in easing mode to try to combat falling inflation.  When longer-term yields are falling relative to shorter-term yields, it is normally a signal that the economy as a whole wants to borrow less, and that the economy is slowing.  Yield curves today are telling us global growth will slow in 2015.  There is only a small recession risk at the moment, but continued flattening of yield curves would be a warning sign that things are due to get worse.