The yield curve has inverted- what is it telling investors?

The US yield curve inverted for the first time since 2019, typically a sign that a recession is looming. Alex Rankine explains why this time may be different.

1970s inflation
Previous inversions have predicted every US recession since the 1970s (although the curve has also sounded a few false alarms).
(Image credit: © Getty)

America’s recession alarm has sounded. The most watched part of the US yield curve – which plots the yields on different maturities of US government bonds – has briefly inverted for the first time since 2019.

In normal conditions, investors holding longer-duration bonds will demand higher yields than those holding shorter ones. But if markets think that interest rates in the future will be lower than they are now – eg, because a recession forces interest rate cuts – then the usual pattern can invert.

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Markets editor

Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019. 

Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere. 

He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful. 

Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.