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Yield curve inversion - an excerpt

"The yield curve has actually inverted, as short-term interest rates are now higher than long-term interest rates. This is always a very bad sign for an economy, as bond players are betting that the economy will be so weak that the Federal Reserve will be forced to drastically lower interest rates, thus increasing the value of their long bonds. ........because an inverted yield curve means we are facing a recession"

When the yeild curve inverts, ie. the price of the short tenure bond is lesser than the price of the longer tenure bonds [indicated through the interest rates charged], it means people are buying the longer tenure bonds thus implying the economy in the next few years would be weak and to compensate for any inflation fears.

source: dude mogambo @ Kitco.com ;)

:) Falkor

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