An Inverted Yield Curve: Should We Be Worried?

A NYT article on the stock market's plunge also noted that the yield curve, defined as the gap between the interest rate on 10-year Treasury bonds and two-year notes, is close to being inverted. The interest rate on 10-year bonds was just 0.12 percentage points higher than the interest rate on 2-year notes. The piece points out that an inverted yield curve has historically been associated with a recession in the near future.

While I would not rule out a recession (we will have another recessi...