EUR 22.80 For Business Accounts Only

A RECOVERING ECONOMY … INSIGHTS FROM THE LESS STEEP INVERTED YIELD CURVE

​ The shape of the yield curve changes in accordance with the state of the economy. The normal or upsloped yield curve may persist when the economy is growing and conversely, the inverted or down-sloped yield curve is likely to press on when the economy is in a recession. In other words, using as a proxy, if the yield on 10Yrs T-Bonds is greater than the yield on 3months T-Bills (positive spread), this means that the economy is performing well. While the negative spread (yield on 10Yrs T-Bonds< yield on 3months T-Bills) indicates the weak status or a recession of an economy. In Egypt’s case, the spread turned into negative post-floatation, indicating the expectation of a slow-down that the Egyptian economy will face over the short term. However, narrowing this spread, and accordingly lower steepness of the inverted yield curve shape, predicts a recovery of the Egyptian economy over the medium term, proved by the foreigners’ inflows in Egypt’s assets. As depicted in the table, the spread narrowed to -1.05% in February 2017, after it soared to -1.87% in December 2016.