The primary reason for the yield on 3-month treasury bills being low during recessions was that "the Fed is driving down short-term interest rates."
What is recession?
A significant, pervasive, and protracted decline in economic activity is referred to as a recession.
Some key features of recession are-
- A common rule of thumb is that a recession is defined as two consecutive quarters of a nation's Gross Domestic Product (GDP) declining. This is because recessions frequently last six months or more.
- A recession is defined by economists as an economic contraction that begins at the peak of the expansion that came before it and ends at the lowest point of the subsequent downturn.
- Recessions could last only a few months, but it could take years for the economy to recover to its pre-recession level.
- The last ten recessions, as well as two that never happened, have all been foretold by an inverted yield curve.
- Many people may perceive the early phases of a comeback as a continuing recession since unemployment frequently persists at high levels far into an economic recovery.
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