Why all the fuss about an inverted yield curve?


This 583 word blog post explains the inverted yield curve on US Treasury stocks and what it could mean as a predictor for economic recession. Written on 5th December 2018.

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Article preview: Before we get started, a brief definition. An inverted yield curve describes an interest rate environment where long-term debt instruments have a lower yield than short-term debt instruments of the same credit quality. In this case, it’s the US Treasury yield curve at stake and it’s become inverted for the first time in more than ten years. It’s inverted because investors want a higher rate of return on their short-term government debt, due to the anticipation of rising price inflation and higher interest rates. But at the same time, investors believe long-term inflation and economic growth will be modest. When these two factors happen at the same time, the yield curve becomes inverted.