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Is the yield curve back to the 1950s-1960s?

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In recent years, the yield curve has flattened and shifted downwards. The flattening has received a lot of attention because it is viewed as a recessionary signal. In this article, we argue that the fact that the curve has shifted downwards as well as flattening indicates that the yield curve may have changed regime. This regime shift seems to have been caused by lower inflation expectations and lower risk premia. In an environment of lower inflation and lower risk premia, the yield curve may occasionally invert without signalling a recession as it did in 1966. 1. The recessionary signal Inversions of the yield curve have often been used to predict recessions. The 10-year to 3-month spread between US Treasury yields became briefly negative twice this year in March and the May (figure 1), spurring debate about whether this was signalling a forthcoming recession. The negative spread was mainly the result of a decrease of the 10-year yield – from 2.8 per cent on 1 March to 2.4 per cen...
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The long and uncertain road to exiting Quantitative Easing

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There is a rich literature on Quantitative Easing (QE) but less so on its unwinding. QE was initiated in 2001 in Japan, followed by the US in 2008 after the Global Financial Crisis, and there has been time to evaluate it, while there has not been any sustained unwinding of QE so far. The only episode that approaches an unwinding of QE is the so-called ‘Taper Tantrum’ in the United States in 2013, when Treasury yields surged on the news that the Federal Reserve would be slowing down its purchases of bonds. In this article, I survey the literature on QE and use the findings to discuss possible exit strategies. While there is little consensus among central bankers on the optimal exit strategy, what stands out is that the road to unwinding will probably be a long and uncertain one, and central banks may even keep large amount of government bonds permanently on their balance sheet. The channels of Quantitative Easing Quantitative easing is the process whereby a central bank purchas...
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Book review: soccernomics

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I just finished reading the fascinating book "SOCCERNOMICS: why England loses, why Spain, Germany and Brazil win, and why the US, Japan, Australia, Turkey - and even Iraq - are destined to become the kings of the World's most popular sport" . It is the first time I ever read anything interesting about football! The authors, Simon Kuper and Stefan Szymanski, are two economists interested in sports and they enjoy to apply - in sometimes an unconventional and surprising way - their economist's tools and reasoning to sports. Using plenty of data, they try to answer the following questions: Why do clubs have so much debt? Is a club a business? How efficient is the transfer market? Should we regulate more the sports markets? aka limit debt, share the revenues more equally among clubs Is it worth hosting a major sports event like the World Cup or the Olympics? How to shoot a penalty? What does the rise and decrease of some clubs tell us? Rather t...
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