Long-term bond yield reflects inflation. Short-term bond yields are tools used to predict Fed's interest rate policy. Spread between the two represents four cycles of an economy.
2. Slow growth Central bank raises interest rates faster and short-term yield exceeds long-term yield. Spread turns negative.
3. Recession High interest rates lead to more defaults. Inflation caps consumption. Central bank lowers interest rate to stimulate the economy and short-term yield falls. Spread widens.
4. Recovery Central bank continues easing. Spread remains wide and yield curve remains steep.
This is really interesting. It looks like any signal, either a green dot or a red dot, represents either a top or a bottom. It could be either, but it's likely one or the other. @zdmre
Simon_says
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Thank you very much for the open-source indicator. It's a very interesting tool!