What Is Inverted Yield Curve? Meaning & Example
Definition
An inverted yield curve occurs when short-term bonds yield more than long-term bonds. Historically it has often appeared before recessions, though not perfectly.
Related terms
The yield curve plots interest rates on bonds of the same credit quality across different maturities. Its shape offers clues about growth and rate expectations.
RecessionA recession is a significant, widespread decline in economic activity lasting more than a few months. It often brings rising unemployment and falling business profits.
Interest RateAn interest rate is the cost of borrowing money or the reward for saving it, shown as a yearly percentage. Central bank rate decisions influence rates throughout the economy.
What is Inverted Yield Curve?
An inverted yield curve occurs when short-term bonds yield more than long-term bonds. Historically it has often appeared before recessions, though not perfectly.
Can you give an example of Inverted Yield Curve?
If 2-year yields are 4.5% and 10-year yields are 4.0%, the curve is inverted.