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Finance
Yield Curve Inversion
When short-term interest rates become higher than long-term rates — often a warning sign of recession.
The yield curve is normally upward sloping. When it inverts, investors expect the central bank to cut rates soon because of an upcoming slowdown. It is one of the most reliable recession indicators in finance.
It's when borrowing money for one year costs more than borrowing for ten years — which is very strange and usually means trouble ahead.
Real world: In 2022 the US 2-year Treasury yield rose above the 10-year yield. This inversion has correctly predicted every US recession for the past 50 years (with a lag of 6–18 months).
💡 Yield curve inversion is the bond market's way of shouting that a recession might be coming.