The Flattening of the Yield Curve in the United States

Economic Bulletin 1/2018

Banco de Espana Article 5/18

12 Pages Posted: 23 Jul 2018

Date Written: March 9, 2018


The results of the Bank Lending Survey show that during 2017 Q4 credit standards for new loans in Spain eased slightly in loans to households and were stable in loans to enterprises. The yield curve for US government debt securities has flattened significantly since late 2016 and its slope, while positive, has fallen to levels not observed since before the global financial crisis. The inversion of the yield curve slope is considered, on occasions, as a leading indicator of future recessions. And this, given moreover that the current expansionary phase is proving more durable than previous upturns, has prompted debate on the implications of the recent flattening of the curve. However, as illustrated in this article, unlike previous episodes, in which the flattening of the curve was explained by the behaviour of the interest rates expected at different terms, at this current juncture it is warranted substantially by the compression of term premia. Against this background, the historical relationship between the yield curve and predicted recessions in the US economy might have altered.

Suggested Citation

Berganza, Juan Carlos and Fuertes, Alberto, The Flattening of the Yield Curve in the United States (March 9, 2018). Economic Bulletin 1/2018, Banco de Espana Article 5/18, Available at SSRN:

Juan Carlos Berganza (Contact Author)

Banco de España ( email )

Madrid 28014
+34913388034 (Phone)
+34913386212 (Fax)

Alberto Fuertes

Banco de España ( email )

Alcala 50
Madrid 28014

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