Yield Curve Inversion

Yield curve inversion means short-term bond yields are higher than long-term bond yields. In simple terms, it happens when investors earn more from short-term bonds than from long-term bonds. Yield curve inversion is important because it can signal that investors expect slower growth, future rate cuts, or a possible recession. It is often watched as a warning sign in the bond market. For example, if the 2-year Treasury yield is higher than the 10-year Treasury yield, the yield curve is inverted. Yield curve inversion does not guarantee a recession. It is a signal investors watch, but timing and outcomes can vary.