Certified Capital Markets & Securities Analyst
Over 15 years of experience in the Financial Services Industry, specialised in Risk Management.
When short-term interest rates rise above long-term rates, the yield curve inverts.
Usually happens when investors expect slower growth or a potential recession.
In a normal economy, long-term bonds have higher yields because investors demand compensation for time and risk. When the curve inverts, it means the market expects future rates to fall — typically because the central bank will cut rates to support a weakening economy.
Hence an inverted yield curve is often seen as a warning signal: it reflects tightening monetary policy, declining confidence in future growth, and historically has preceded most recessions.
