There was once a time when the flattening of the yield curve was a reliable - but never infallible - precursor to slowing economic activity. Today, we have bull flatteners (where long-term rates fall relative to short-term rates) as well as bear flatteners (where short-term rates rise to meet long-term rates) and there is no clear economic inference. The emphasis has shifted from policy behaviour, influencing the path of short-term interest rates and rippling out to long-term rates, to investor positioning along the yield curve. Where will invesotrs turn next?
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