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Positive Yield Curve Makes Double-Dip Recession Unlikely

Analysts say it's unlikely the U.S. will see a double-dip recession.

Finance professionals who watched last week's market volatility with an uneasy eye may be able to rest a little easier if they take a look at the Treasury yield curve. That's because recessions are highly unusual when the Treasury's yield is "steeply positive," several chief analysts told Bloomberg.

"Since the Great Depression, there have been 30 market declines of 15 percent or more - but only two of those predicted a recession," BlackRock chief equity analyst Bob Doll told the news source. He acknowledged that the risk of a double-dip recession was higher than normal, but said the yield curve and lack of a rise in initial unemployment claims reduced the likelihood.

James Bevan, CCLA Investment Management's chief investment officer, echoed this positivity in an interview with the source, noting there were "plenty of excellent buying opportunities amongst defensive and cyclical companies."

An August forecast from Honolulu-based risk management firm Kamakura Corporation found that one-month Treasury bill rates dropped "significantly" - falling up to 90 basis points from July.

The firm's CAO, Martin Zorn, stated the yield's forward curve was impacted by lingering economic uncertainty and "weakening fundamentals," as well as investors' general reluctance to buy risky assets and the continued problems of European sovereign debt.  

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