Compare
| Curve Shape | What It Signals | Historical Implication |
|---|---|---|
| Normal (upward) | Long rates above short rates | Healthy economy, growth expected |
| Flat | Short and long rates similar | Uncertainty, possible transition |
| Inverted | Short rates above long rates | Recession warning (has preceded every recession since 1970) |
| Steep | Wide gap between short and long | Early recovery, accommodative policy |
Key point
An inverted yield curve has predicted every US recession since 1970 with only one false signal. When the 2-year yield exceeds the 10-year, pay attention.
Try it
Check the **yield curve chart** in the Markets view. Is the current curve normal, flat, or inverted? What does that imply?
Key insight
Check-in
The yield curve shows: 2Y at 5.2%, 10Y at 4.3%, 30Y at 4.1%. What's the market signaling?
Check your understanding
Sit with the ideas.
The 1-year Treasury yields 5.0% and the 2-year Treasury yields 4.5%. What does the implied 1-year forward rate (the rate the market expects one year from now) tell you?
Why: