The Lag Factor in Inverted Yield Curves
It takes 15 months for the Inverted Yield curve to show up in economic data. Thus writes Tom McClellan, Editor, The McClellan Market Report in a February 20, 2020 article in his newsletter.
Inverted yield curves in bond rates appeared in late 2018 and early 2019. Some cheered when the economy seemed to be resisting a recession in spite of the inverted yield curves. If Mr. McClellan is right, we are about due for an economic downturn any time now. Credit unions should have early warning systems in place that notifies managers when borrowers are beginning to experience difficulty making their loan payments.
TCT’s Credit Migration tool assures loan risk is managed appropriately by reporting those borrowers who are showing signs of possible loan default long before those borrowers show up on delinquency reports.