Inverted Yield Curve

An inverted yield curve happens when short-term bonds pay higher interest rates than long-term bonds—the opposite of normal. Normally, you expect to earn more money by locking your cash away for 10 years than for 1 year, since you're taking on more risk. When this flips, it often signals that investors are nervous about the economy's near future and are willing to accept lower returns just to park money safely for longer. You'll hear economists and financial news mention it because historically, an inverted yield curve has preceded recessions—economic slowdowns where companies struggle and job losses rise. For example, if a 2-year Treasury bond yields 5% while a 10-year bond yields 3%, that's an inversion worth paying attention to.