Mnuchin Dismisses Flatter Yield Curve as Sign of Weak Economy
Inversion of the yield curve is seen by many investors as a harbinger of an economic downturn.
(Bloomberg) -- Treasury Secretary Steven Mnuchin dismissed the economic significance of a flattening yield curve that some investors see as potential precursor to a U.S. recession.
“I don’t necessarily believe that the yield curve at this time is an adequate predictor of future economic issues,’’ he said in in a round-table interview Tuesday at Bloomberg’s Washington office.
The yield curve has flattened this year as Federal Reserve interest-rate hikes and increased Treasury debt issuance has placed upward pressure on short-end yields. At the same time, longer-end rates have held in check as inflation expectations have remained muted.
Inversion of the yield curve is seen by many investors as a harbinger of an economic downturn. The gap between 2-year and 10-year yields on Treasury securities dropped to less than 10 basis points earlier this month.
Asked how much he looked at the yield curve as a reliable signal of the economy, Mnuchin replied, “Not at all. Not at all.”
“I’m a big believer in general that markets are not always efficient,’’ he said, adding that he looks at a variety of market information including the yield curve, federal funds futures, the stock market and oil prices.
In the interview, Mnuchin declined to comment broadly on the economy or on the Federal Reserve, which began a two-day meeting on Tuesday to determine whether to raise rates for the ninth time since December 2015. President Donald Trump earlier unleashed on Twitter another critique of the central bank, urging it to “feel the market’’ and avoid “yet another mistake’’ by raising rates.
--With assistance from Benjamin Purvis.
To contact the reporters on this story: Rich Miller in Washington at rmiller28@bloomberg.net;Saleha Mohsin in Washington at smohsin2@bloomberg.net
To contact the editor responsible for this story: Brendan Murray at brmurray@bloomberg.net
©2018 Bloomberg L.P.