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The Flip Side: Episode 4

The yield curve: Recession signal or market noise?

Jeff Meli in conversation with Michael Gapen.
Jeff Meli Michael Gapen
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Since the beginning of 2018, yields on US Treasuries of various durations have crept upward, substantially flattening the yield curve in the process. As the yield curve approaches the point of inversion, equity market volatility has also risen, in part due to the historical significance of the yield curve as a signal of a coming recession. But with a strong and growing US economy, is the flat yield curve still an adequate warning sign today? Or is this just noise in the system?

In this episode of The Flip Side podcast, Jeff Meli, Head of Research, sits down with Michael Gapen, Chief US Economist, to explain what’s happening and debate whether the yield curve remains a relevant indicator of a recession for investors. They review the historical context and role of the yield curve in recessions past, and how this time around may – or may not – be different.

Ep. 4: The yield curve: Recession signal or market noise?

Jeff Meli
Michael Gapen

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Authorised clients of Barclays Investment Bank can log in to Barclays Live to access related reports entitled How I learned to stop worrying and love higher rates and Proceed with caution.

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The Flip Side podcast 

This podcast series features lively debates between Barclays’ Research analysts on important topics facing economies and businesses around the globe.

GLOBAL OUTLOOK

Q4 Global Outlook: The US, and then the rest 

Barclays Research remains positive on equities as the US economy surges ahead. Our analysts believe that neither global trade sanctions nor potential contagion from emerging markets are likely to upset this growth trajectory.

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About the analysts

Jeff Meli is Head of Research within the Investment Bank at Barclays. Jeff joined Barclays in 2005, as Head of US Credit Strategy Research. He later became Head of Credit Research, playing a key role in the expansion of the firm’s credit research franchise. He has taken on a number of other senior positions since then and was most recently Co-Head of FICC Research and Co-Head of Research before being named Head of Research globally.

Jeff spearheaded the firm’s response to regulatory changes in Macro and Credit Research, as well as under MIFID II, representing the firm in conversations with regulators and as part of industry working groups. Previously, he worked at Deutsche Bank and JP Morgan, with a focus on structured credit. Jeff has a PhD in Finance from the University of Chicago and an AB in Mathematics from Princeton.

Michael Gapen is a Managing Director and Head of US Economics Research at Barclays. Based in New York, Mr. Gapen is responsible for the firm’s outlook for the US economy and, in particular, US monetary policy and the impact of financial markets on the economy. Prior to taking on this role, Mr. Gapen was a Senior US Economist and, following his appointment as Asset Allocation Strategist in January 2012, Mr. Gapen took on additional responsibility for forming the firm’s asset allocation views and marketing them to clients.


Mr. Gapen joined Barclays in 2010 from the Board of Governors of the Federal Reserve, where he was a Section Chief responsible for monetary and financial market analysis. In that capacity, he assisted the Board and the FOMC in the formulation of monetary policy and the Federal Reserve’s response to the financial crisis. Prior to that, he served as an Economist with the International Monetary Fund. Mr. Gapen has also taught Finance and Economics at institutions including Kelly School of Business and Department of Economics at Indiana University, Mendoza College of Business at the University of Notre Dame, and the Department of Economics at Johns Hopkins University. Mr. Gapen holds a Ph.D. in Economics from the Department of Economics at Indiana University.

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