Inverted Yield Curve
a.k.a. Yield curve inversion
When short-term government bonds pay higher yields than long-term ones, often seen as a warning of recession.
In plain English
When short-term government bonds pay higher yields than long-term ones, often seen as a warning of recession.
Normally, lending for longer pays more, so the yield curve slopes up. An inverted yield curve flips that: short-term yields rise above long-term ones, usually because the central bank has pushed short rates up and investors expect cuts later.
In the US, inversions have come before many past recessions, though the timing is loose and the signal is not perfect. The curve inverted in 2022 and stayed that way for an unusually long time.
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