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FAQ: What does it mean when a yield curve inverts?

January 12, 2023

Yield curves have to do with interest rates on various bonds. When you buy a bond, you have an expected return, or yield on that bond.

A yield curve is a graph that shows the relationship between interest rates and the maturity of bonds. It typically plots the yields of a range of bonds with different maturities, such as 3-month, 2-year, 5-year, and 30-year bonds. The shape of the yield curve can indicate the overall direction of interest rates and the health of the economy. A normal yield curve is upward sloping, meaning that longer-term bonds have higher yields than shorter-term bonds. An inverted yield curve, on the other hand, is downward sloping, indicating that short-term rates are higher than long-term rates and can be an indicator of a potential recession. A flat yield curve is also a troubling sign for economic health, as investors are getting no benefit for longer term use of their money.

An inverted yield curve is often seen as a sign of a coming recession.

There are several places where you can check yield curves. Major sources include:

  • The Federal Reserve's website: The Federal Reserve publishes yield curves for various Treasury securities on its website.
  • Bloomberg: Bloomberg is a financial news and data provider that offers a wide range of market data, including yield curves for various bonds.
  • Tradeweb: Tradeweb is an electronic marketplace for trading fixed income securities and other financial instruments. They also provide yield curve data for their clients.
  • Financial news websites: Many financial news websites, such as Wall Street Journal, also provide yield curve data on their website.
  • Banks and financial institutions: Some banks and financial institutions also provide yield curve data for their clients.

The yield curve can be constructed from various bonds, such as Treasury bonds, municipal bonds, corporate bonds, etc. So the availability and the level of granularity can vary depending on the source.

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