Some members of the investment community who are watching bond yields rise are predicting that the current economic cycle could be reaching a peak. That has sparked fears that a recession could be looming. But, as CNBC staffer Silvia Amaro reports, Bank of America's investment arm says the economy is at least 27 months away from a recession – in 2021.
Here’s how Amaro outlines the economic fears of some:
The "flattening of the yield curve" — where short-term interest rates get closer to the long-term rates — has sparked some fears that a recession is around the corner. In a normal functioning economy, short-term lending has fewer risks — the underlying thought is that you can more easily predict what's happening tomorrow rather next month.
Prior to previous recessions, the gap between these two rates has narrowed, thus every time the two get closer some investors prepare for the worst. But, according to Bank of America Merrill Lynch, we are not there yet.
"The yield curve may be flattening but our rates strategists do not expect it to invert in 2018," the research note Tuesday said.
"Of course history is only a guide and there continue to be risks care of possible trade wars and survey data," they also warned.
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