Inverted Yield Curve

An inverted yield curve happens when short-term bonds pay higher interest rates than long-term bonds—the opposite of what normally happens. Usually, you get paid more for lending money longer because there's more risk. When this flips, it often signals that investors expect economic trouble ahead, so they're willing to accept lower returns on long-term bonds just to feel safe. You'll hear economists and financial news talk about it because historically, an inverted curve has preceded recessions (periods when the economy shrinks). For example, if a 2-year Treasury bond yields 5% while a 10-year Treasury yields 4%, that's inverted. It's not a guarantee of doom, but it's a yellow flag worth watching.