What is an 'Inverted Yield Curve'?

An inverted yield curve is the interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

| Term of the Day Inverted Yield Curve An inverted yield curve represents a situation in which long-term debt instruments have lower yields than short-term debt instruments of the same credit quality. The yield curve is a graphical representation of yields on similar bonds across a variety of maturities. A normal yield curve slopes upward, reflecting the fact that short-term interest rates are usually lower than long-term rates. That is a result of increased risk premiums for long-term investments. When the yield curve inverts, short-term interest rates become higher than long-term rates. This type of yield curve is the rarest of the three main curve types and is considered to be a predictor of economic recession. Because of the rarity of yield curve inversions, they typically draw attention from all parts of the financial world. Read More » Related to "Inverted Yield Curve" The Impact of an Inverted Yield Curve Understand how the relationship between short- and long-term interest rates contributes to an inverted yield curve – a noteworthy economic event. Read More » Bond Yield Curve Holds Predictive Powers The bond yield curve measure can shed light on future economic activity, inflation levels, and interest rates. Read More » Understanding Treasury Yield And Interest Rates By understanding the factors that influence treasury yield and interest rates, you can learn to anticipate their movement and profit from it. Read More » Related Definitions Short-Term Debt Short term debt, also called current liabilities, is a firm's financial obligations that are expected to be paid off within a year. Read More » Treasury Yield Treasury yield is the return on investment, expressed as a percentage, on the U.S. government's debt obligations. Read More » 30-Year Treasury The 30-Year Treasury, formerly the bellwether U.S. bond, is a U.S. Treasury debt obligation that has a maturity of 30 years. Read More » Maturity Date The maturity date is the date when the principal amount of a note, draft or other debt instrument becomes due and is repaid to the investor. Read More » CONNECT WITH INVESTOPEDIA Email sent to: mondemand.forex@blogger.com To update your newsletter preferences or unsubscribe, click here. 114 West 41st St, floor 8 New York NY 10036 © 2019, Investopedia, LLC, All Rights Reserved | Privacy Policy