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Yield Curve Inversion

Yield inversion typically refers to a case where long-term government bond yields are below short-term government bond yields.

Usually, the opposite is true, as yield curves are generally upward-sloping. That's because investors demand more compensation (higher rates) for the extra risk of lending their money for longer terms.

A negative (i.e., inverted) yield curve is a popular recession indicator. When the 10-year government yield falls below the 2-year government yield, for example, a recession often follows within roughly 12-24 months.

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