# Inverted Yield Curve

*Markets & Instruments — Finicade finance glossary*

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.

**Also known as:** yield curve inversion, inversion, 2s10s inversion

**Related terms:** [Yield Curve](https://finicade.com/glossary/yield-curve), [Recession](https://finicade.com/glossary/recession), [Term Premium](https://finicade.com/glossary/term-premium), [Monetary Policy](https://finicade.com/glossary/monetary-policy), [Treasury Bond](https://finicade.com/glossary/treasury-bond)

Source: https://finicade.com/glossary/inverted-yield-curve