eli5 what is a yield curve inversion?
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The [yield curve](https://en.wikipedia.org/wiki/Yield_curve#/media/File:Yield_curve_20180513.png) is the chart that shows the interest payments for bond/securities over time. As you can see, the amount that you normally expect to get in interest goes up the longer the term of the security. This makes sense if you think about it – tying your money up for longer means you are less flexible in what you can invest in, so you would demand higher yields to compensate for that.
When the yield curve inverts, it means that interest rates go _down_ the longer you tie your money up. This doesn’t make much sense _unless_ investors think that there won’t be good opportunities to invest in the future, so they are wiling to accept lower rates in the future because they believe that when that day comes, the investments available will payout _even less_ than this lower interest rate.
Its generally seen as a negative indicator for an economy. Pessimistic investors can indicate that there is an econonmic downturn they see coming.
The US offers bonds (buying a bond is basically loaning money to whoever is offering it). When you buy one, your money is inaccessible until the bond length ends. The US offers different bond lengths, let’s say short, medium, and long. For example, 3 months, one year, five years. There are probably more and with different lengths but we don’t have to get specific here.
They have different interest rates, proportional to their duration. So, if you graphed them, you’d see a line going up. The yield curve inversion is when the line goes down. That means people expect the US to not continue growing its economy. A very important thing to note is that whenever this has happened for several months straight, a recession has quickly come after.
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