Inverted Yield Curve

• a classic recession warning signal
  • it has preceded every recession of the last 60 years (Circa 2020)
    
    
• Typically describes when the 10-year yield falls below the 2-year yield (most often cited yield curve)
• Means that investors are getting paid less to lend money over a longer time period
• Has been a great indicator of an upcoming recessions
• Act as a "warning sign"
• Has forecasted all 9 US recessions since 1957
• Examples:  107-27 yiled curve inverted 22 months before the market top in 2007 (57% plunge after) 
• One of the most reliable economic indicators
• On average it takes 14 months from a yield curve inversion till a recession begins
• On average it takes 8 months from a yield curve inversion till a stock market peak

What Causes a Yield Curve Inversion?

• Might occur when investors get worried about an economy, buy long term-bonds for protection, and drive up the price (lower yield) of those bonds
• Investor Fear - they buy bonds as a save haven