Inverted Yield Curve

An inverted yield curve occurs when long-term interest rates are lower than short-term rates, which is unusual because usually, lending money for longer periods involves higher interest to compensate for increased risk. This phenomenon suggests that investors expect economic growth to slow or contract in the future, possibly indicating a recession. It can signal that confidence in the economy is waning, and investors are seeking safer, longer-term investments, driving down those yields. An inverted yield curve is often considered a forward-looking indicator of potential economic downturns, prompting cautiousness among policymakers and market participants.