Bank of America sees 25% chance of a U.S. recession in 2016

Despite increased chatter about the probability of an economic contraction, the odds of the U.S. slipping into a recession in the next 12 months are only about 25%, according to economists at Bank of America Merrill Lynch Tuesday.

“Our quantitative analysis suggests recession risk is rising, but contained,” Martin Mauro, a fixed income strategist at Bank of America Merrill Lynch, said in a report. “Late-cycle excesses that are typical warning signals of an impending downturn are not present. And despite weakening industrial sector data, growth elsewhere has remained robust.”

Mauro and his colleagues turned to what they consider the most reliable leading indicator of a recession—the yield curve slope from the spread between 10-year Treasurys TMUBMUSD10Y, -0.83% and 3-month bills. The yield curve generally spikes ahead of an economic downturn.

[link to www.marketwatch.com]