Inverted Yield Curve

An inverted yield curve happens when short-term bonds pay higher interest rates than long-term bonds—the opposite of normal. Usually, you'd expect to earn more money by lending your cash for 10 years than for 2 years, since you're taking on more risk. When this flips, it often signals that investors are nervous about the economy's future, so they're willing to accept lower returns on long-term bonds just to lock in safety. You'll hear economists and financial news mention it because inverted yield curves have historically preceded recessions—periods when the economy shrinks and job losses rise. For retail investors, it's worth watching as a potential warning sign.