MORE ON YIELD INVERSION The following points came out of PIG’s April 2019 meeting. Yield curves as shown in the Forum show rate inversions in USA and Australia. In USA a rate inversion typically precedes a recession by 15 months but in Australia the linkage is not as definitive. A look at bond mechanisms showed the following relationships:  Bonds yields (Govt in this example) are inversely related to bond value. If bond yields fall, bond prices increase. Conversely, if bond yields rise then bond prices fall.  USA and AUS monetary policy post GFC was to stimulate the economies by increasing money supply and decreasing interest rates.  USA Federal Reserve did this by buying bonds in the open market. Bond prices lifted, Govt funds were thereby injected into the economy (quantitative easing).  In AUS the RBA seems to prefer public announcements via the management of the cash rate that influences the economy and perhaps some money supply management.  In USA in early 2018 the FED commenced quantitative reduction with the effect that interest [...]