If term premiums remain low, yield curve inversions are likely to become more frequent even if there is no increased risk of recession, a team of researchers from the Richmond Fed says.

In the report, Renee Haltom, Elaine Wissuchek and Alexander Wolman simulate data for the short-term interest rate and then measure how the frequency of yield curve inversions varies with the behaviour of the term premium.

They find that the occurrence of yield curve inversions in these simulations differs with