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An Inverted Yield Curve occurs when the yield offered on Short-Term Bonds exceeds that on Long-Term. The Yield Curve then slops down from Left to Right, which is uncommon and could signal a recession.

The Yield Curve plots the interest rate at the various maturities, short term to long term of Bonds issued by the same country. The broad classification of the Yield Curve is divided into two forms, the Normal Yield Curve and the Inverted Yield Curve. The Inverted Yield Curve is an unusual event where Short-Term Interest Rates exceed Long-Term Interest Rates, thus the Yield Curve slopes down from Left to Right. When a Yield Curve inverts, Bond Investors are possibly looking at the Flight to Quality Trade, pushing Long-Term Rates below Short-Term Rates. There could be several factors causing the inversion. In 2008, it was in response to pending Bank failures or it could be as a response to forecasts of a possible decline in economic activity.


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Warren William

Meet the author behind Smartest-Data. Warren William has a career in Finance and Investments extending over 35 years, both on the Buy Side and Sell Side. His most recent roles include, developing Institutional Risk Management Programs for managing Equity and Fixed Income Risk.  Prior to this Warren William work in Alternative Investments, in Investment Management and as a Buy Side Equity Analyst. Warren William brings a wealth of knowledge and expertise to the table, providing in-depth analysis and commentary on the latest trends in the Stock Markets. Contact information: or Telegram +393339034488

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