The US just got a big recession warning, with the spread between 2-year and 10-year federal debt falling below zero for the first time since 2007.
Using data from the OECD, we took a look at the history of recessions across the world.
The chart shows how harshly the Great Recession of 2007-2009 affected most countries.
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The US just got a big recession warning on Wednesday, with yields on longer-term federal debt dropping below yields on shorter-term debt.
That could cause panic for anyone who remembers the last time that happened: right before the Great Recession that began in 2007.
The following years saw massive amounts of economic chaos around the world. Throughout the fall of 2008, Wall Street shook as century-old investment banks were toppled amid a collapse of the overheated US housing market. Hundreds of thousands of jobs were lost every month, and the unemployment rate hit a high of 10% in October 2009. A decade later, the effects of the worst recession in generations is still being felt, with the labor market only recently coming close to a full recovery.
While a financial crisis and recession as severe as the last one remain unlikely, markets are now warning that economic turbulence could lie ahead.
The spread between 2-year and 10-year Treasury yields fell below zero for the first time since 2007. Normally, interest rates on short-term debt are lower than rates for longer-term debt, as the latter ties up capital for longer and is generally considered more risky and thus demanding of a higher return.
A reversal of that pattern is generally viewed by investors and economists as a bad sign for the economy going forward. Indeed, the yield curve inverted before each of the last seven US recessions.
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Source:: Business Insider