Will George W. Bush reign over two recessions like Ronald Reagan did?
Yields on 10-year US Treasuries fell briefly below those on two-year notes on Tuesday for the first time in five years – a rare event that in the past has often heralded a recession. Longer-term Treasury yields are usually higher than shorter-term ones because of the uncertainties involved in lending at fixed interest rates for long periods. When the situation reverses, or inverts, it suggests that bond investors expect interest rates to fall, a trend often associated with weak growth and low inflation. According to analysts at Bank of America, the past six US recessions were preceded by an inversion of the yield curve, which plots the yields on Treasury bonds against their maturities. The most recent inversion in late 2000 came ahead of the recession that began in March 2001. Twice in the past 40 years, however, an inversion of the yield curve has not been followed by a recession. This is what many economists – including Alan Greenspan, chairman of the US Federal Reserve – think is happening this time. Alan Ruskin, research director at 4Cast, the economic consultancy, said: "Not many people out there think the economy is going to fall off a cliff."
Ronald Reagan, in an artist's rendition of him at Mt. Rushmore
