Inverted Yield Curve
Also called: yield curve inversion, inversion, 2s10s inversion
An inverted yield curve occurs when short-term government yields exceed long-term ones — the market saying rates are high now and will have to fall. It is the most reliable single recession signal in US data, preceding every recession since the 1960s, though with lags of six to twenty-four months and occasional false alarms. The mechanism is not magic: inversion also squeezes bank lending margins, which tightens credit and helps cause the slowdown it predicts.
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