Recently, you may have seen some headlines talking about an "inverted yield curve" and what it may mean for the economy. An inverted yield curve is just one indicator of the economy's possible direction, so let's put these headlines into context.
First, what is the yield curve, and what does it show? The yield curve is a graphical representation of interest rates (yields) paid out by US Treasury bonds. A normal yield curve shows increasingly higher yields for longer-dated bonds, creating an upward swing. An inverted curve has a downward slope, indicating that shorter-dated bonds yield more than longer-dated bonds, which isn't typical.
