When short-term government debt pays more interest than long-term debt, historically a recession warning.
Normally, lending money for longer pays a higher interest rate than lending it for a few months, because more can go wrong over a longer stretch. An inverted yield curve is when that flips: short-term government debt pays more than long-term debt. It usually means investors expect the economy to weaken and interest rates to fall later, so they'd rather lock in today's higher long-term rate while they can. It's one of the more reliable recession warning signs in modern economic history, though "reliable" still means it can take a year or two to actually show up.
Part of the Open Bell Glossary — plain-English explanations of the terms that come up on the show. Browse every term.