what an inverted yield curve means for the economy?
In: Other
Ok, first: what’s a treasury bond?
A treasury bond is basically where you give the US government some money, and in exchange they promise to pay you back after some specified period (e.g. 3 months, 2 years, 10 years, or 30 years) plus interest.
Normally, the longest-term bonds have the highest interest rate (the “yield”) and shorter-term bonds have lower yields. When you plot this on a graph, with the maturity time on the X axis and the interest rate on the Y axis, it always slopes up. An “inverted yield curve” is when part or all of the graph slopes down because shorter-term bonds are paying *higher* rates than long-term ones.
Some believe that an inverted yield curve is a predictor of an imminent economic recession. Others dispute that conclusion, or say that it isn’t true anymore as of the last few years.
Latest Answers