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inverted yield curve

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Inverted Yield Curve
Usually a chart showing long-term debt instruments that have lower yields than short-term debt instruments. It is sometimes referred to as a negative yield curve.





Partial inversion is when only some of the short term treasuries (5 or 10 years) have yields higher than the 30 year ones.

Notes:
History has shown that inversions of the yield curve have preceded the last five U.S. recessions. The yield curve can accurately forecast the turning points of the business cycle.


Inverted yield curve
When short-term interest rates are higher than long-term rates. Antithesis of positive yield curve.

inverted yield curve

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Davis points out that a number of observers have expressed surprise that an inverted yield curve between long- and short-term interest rates would develop in the capital markets at a time when the economy did not appear to be in any immediate danger of tanking.
Those views are based on long-term rates remaining relatively low while short-term rates rise and comments by Bernanke which indicate no concern an inverted yield curve would signal economic slowdown.
 
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