The financial world is buzzing with an arcane sounding issue—the inverted yield curve. Here’s what that means: The overwhelming majority of the time, the longer you want to borrow money for, the higher the interest rate. So a 30-year mortgage will typically carry a higher rate than a 15-year mortgage; that’s true of government bonds as well. Every now and then, however, that script flips, and rates for short-term debt exceed those for long-term debt, “inverting” the typical yield curve. That’s the situation now. Lend money to the US government for one month, and Uncle Sam will pay you 2.01 percent interest; lend it for 10 years, and you’ll only get 1.47 percent (per year). Here’s why that matters: An inverted yield curve historically has been a reliable indicator that a recession is on the horizon.
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