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 === 1. Yield Curve ===
-According to a Chicago FED research<ref>https://www.chicagofed.org/publications/chicago-fed-letter/2018/404#ftn3</ref>, the yield-curve slope becomes negative before each economic recession since the 1970s. That is, an “inversion” of the yield curve, in which short-maturity interest rates exceed long-maturity rates, is typically associated with a recession in the near future.
+Cases of shorter-term rates trading higher than longer-term ones are called curve inversions. They typically arise when central banks are in the process of raising policy rates, a maneuver that pushes up the short-term yields while weighing on longer-term yields by damping expectations for inflation and growth. In the US, they have a track record of preceding economic downturns by 12 to 18 months.
-In their research there are mainly two reasons driving the yield curve inversion:
+Yield curve inversions are tipical when interest rates are rising or already at a high level, and markets start to have expectations that rate cuts will happen at some point in the future, among the reasons are:
-# If investors see higher odds of a recession, the long-term inflation risk premium in Treasury bonds will fall.  In recent recessions, the risks of unexpectedly low inflation have increased relative to the risks of unexpectedly high inflation. This is explain because in periods of low inflation, the fixed nominal cash flows from a nominal bond become more attractive, driving up the prices of these bonds and lowering their interest rate.
+* Expectations inflation will come down to low levels, allowing for monetary easing
-# If investors see greater risk of recession, they will attribute higher value to short-term assets that they can easily liquidate to finance spending on goods and services. Hence, they will require higher compensation to keep holding long-term securities. This means a yield curve inversion in this escenario is an expectation of lower odds of a recession.
+* Expectations growth will decline in the future
+* Expectations unemployment will rise in the future.
-Due to these contradictory reasons, not all yield curve inversion will signal a recession, thats' why is important to understand the current enviromnent we are in and the sentiment among inversions. Since several surveys has been done recently already, especially the latest Philadelphia Fed survey of professional forecasters showing the probability of a recession in the next year is the highest in the 50+ years this survey has been conducted<ref>https://www.philadelphiafed.org/surveys-and-data/real-time-data-research/spf-q4-2022</ref>, we can conclude that this time investors are pricing in mostly higher odds of a recession in the yield curve inversion.
+Not all yield curve inversion should be a confirmed signal of a recession, thats' why is important to understand the current enviromnent we are in and the sentiment among inversions, and use it along with other supportive data or indicators. However in the US, deep and long yield curve inversion have always followed a recession, and this is the reason is one of the most followed indicators by economist and investors.
-What is the current data telling us?
+Current data:
-# The 10Y2Y spread<ref>https://fred.stlouisfed.org/series/T10Y2Y</ref>: Current inversion is around  -70 bps,the  worst level since the  1980s, the continuing inversion started on July 2022.
+# The 10Y2Y spread<ref>https://fred.stlouisfed.org/series/T10Y2Y</ref>: Current inversion is around  -81 bps, the  worst level since the  1980s, the continuing inversion started on July 2022.
-# The 10Y3M spread<ref>https://fred.stlouisfed.org/series/T10Y3M</ref>: Current inversion around -60 bps, in line with the most serious inversions, the contuining inversion started on October 2022.
+# The 10Y3M spread<ref>https://fred.stlouisfed.org/series/T10Y3M</ref>: Current inversion around -98 bps, in line with the most serious inversions, the contuining inversion started on October 2022.
 # Majority of the yield curve is inverted at this moment, this condition has always preceded a recession <ref>http://www.worldgovernmentbonds.com/country/united-states/#:~:text=The%20United%20States%2010Y%20Government,last%20modification%20in%20December%202022).</ref>
-In conclusion, due to the fact that  the Yield curve inverts due to expectations of higher odds of recession, that the Yield curve has inverted before each recession and that usually the average lead time between the inversion and the recession is equal or greater than one year, there is a high likehood that relying on this indicators the recession risks in the US economy are amplify significant for the second half of 2023 onwards.
+The yield curve inversion is giving a signal that there is a high likehood that recession risks in the US economy are amplify significant for the second half of 2023 onwards.
 === 2. Housing Market Activity ===
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 Also important to point out that is volumes that matter for real GDP accounting, not prices. Prices can matter indirectly through a wealth effect, but be a little skeptical about this. And that the sluggishness of price adjustments is what makes the volume cycle so extreme, and what makes housing so important in recessions.
-What is the current data telling us?
+Current data:
 # Pending home sales in the US plummeted by 37% year-on-year in October of 2022, the sharpest yearly decline on record. <ref>https://tradingeconomics.com/united-states/pending-home-sales</ref>