The last time the U.S. Treasury yield curve was this flat, it presaged a recession. Still, there’s no serious risk that the same sequence of events will repeat this time, according to Goldman Sachs Group Inc.

While near-term interest-rate increases by the Federal Reserve may lead to a further flattening of the front end of the curve and potentially some inversion, a historical analysis from the 1960s shows that isn’t sufficient to establish a recession is looming, strategists at the bank led by Praveen Korapaty wrote in a research note.

Three of the last 10 times the yield slope inverted, there was no recession over the following two-year period, according to the bank.

“The bottom line is we don’t believe that investors ought to overly fear a flat yield curve, either as a signal or a cause of a recession,” the analysts wrote. “The impact of flattening in the term spread on bank profits, while significant for smaller banks, is marginal for larger institutions.”

The difference between two- and 10-year yields, a gauge of the slope of the yield curve, narrowed to as little as 23.4 basis points Friday, the least since August 2007. The curve last inverted in June 2007.

• “Our projection for the evolution of the curve most closely resembles the last cycle, despite the difference in details such as the presence of the Fed’s SOMA portfolio reduction, a far more gradual pace of tightening, and a late-cycle fiscal stimulus,” according to the analysts
• U.S. 2s10s curve expected to invert first, within the next 2 to 3 rate hikes, and likely occur around the 3%-3.2% level in 2y yield
  • Inversion will probably be less than 25bps, given the gradual pace of hikes and increases in inflation rates
• The bank recommends near-term curve flatteners such as 2y3m/3m3m and 2s10s, but after the curve flattens further, they prefer forward yield steepeners such as 2y fwd 2s10s that have tended to outperform spot curves