How far is the next recession?

Since the turn of the year, economic momentum across the globe has continued to fade and concerns about a slowing global economy started to emerge. Following a series of downbeat data, the Fed was pushed to pause on interest-rate hikes this year while the ECB is likely to postpone its plans to implement its first rate hike. Cognisant of the fact that the US, the main driver of the global economy, is a few months shy of entering the longest expansion cycle on record, the probability of a slowdown or indeed a recession seems to have increased.

On March 22 the yield on the US Treasury three-month bill was higher than the yield offered on the 10-year note. This followed the yield inversion of the US Treasury three-month bill and the five-year note back in December 2018, which was the first time the US Treasury yield curve inverted since the Great Recession that started in December 2007. In reality the spread was not material, a mere two basis points, however this is considered by many a gloomy signal for the US economy.

Contrary to the short-end of the yield curve which is anchored to the federal funds rate, the long-end of the yield curve, among other things, is deemed as a...