Global stocks crumbled in a punishing sell-off this morning as an inverted U.S. bond yield curve intensified fears about a worldwide recession.
The yield spread is a simple calculation that involves subtracting short-term interest rates from long-term interest rates.
An inverted yield curve occurs when long-term debt instruments have a lower yield than short-term debt instruments.
Kieno Kammies speaks to economist Dr Azar Jammine of Econometrix to find out why this is happening and what an inverted yield curve means.
It does not necessarily mean we are going into recession, because in the last ten years central banks of the world have confused the issue by artificially buying back bonds from financial institutions - so-called quantitative easing.— Dr Azar Jammine - Econometrix
This may have resulted in a distorted of the trend of interest rates, he says.
He says this pattern of pumping more money into the global financial system artificially is of great concern.
It is artificially trying to keep the wolf at bay.— Dr Azar Jammine - Econometrix
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