interest rates

Inverted Yield Curves

On Tuesday morning most of us woke up to the headline, “Yield Curve Inverts”. Depending on who you follow, the title may have been much more dramatic. Perhaps something like, “Interest Rates Signal Recession”, or so on. What every one seems to understand is simple, when the yield curve inverts, that is a historical signal for a coming recession. Of course, nobody knows how far out that recession may be, it could be months or years. But what is an inverted yield curve? And why would it signal a changing market cycle?