Glossary term
Curve Inversion
When short-term yields exceed long-term yields; a recession indicator that historically leads downturns by 12-18 months.
Curve Inversion occurs when short-term Treasury yields rise above long-term yields, the opposite of the normal upward-sloping curve. It is one of the most reliable recession indicators, historically preceding U.S. downturns by roughly 12-18 months. The inversion reflects a market that expects the Fed to eventually cut rates sharply in response to economic weakness. See Money Temperature 101.