The yield curve plots the interest rates on government bonds. When the interest rates on long-term government bonds are lower than the interest rates on short-term government bonds, the yield curve is inverted. For many economists, this means one thing: an economic recession is on the way. That’s because, for the past six decades, three months of an inverted yield curve was followed by a recession.
Back in March, the yield curve inverted.
Planet Money listeners have been writing in, a little freaked out, wondering what’s going to happen to the U.S. economy. Today on the show, we answer your questions. And break down what the yield curve is, where it came from, and what it might tell us.
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