Inverted Yield Curve
An inverted yield curve is a situation where the yield on short-term government bonds is higher than the yield on long-term government bonds. An example of this is when the yield on the 2-year U.S Treasury bond is higher than the yield on the 10-year U.S Treasury bond.
The formula for calculating the yield curve is Yield = (Price/Face Value) ^ (1/Time to Maturity) - 1.
An inverted yield curve is created when the yield on the short-term bond is greater than the yield on the long-term bond. This can indicate that investors are expecting a recession in the near future due to concerns about economic growth. Inverted yield curves can also be caused by central banks raising interest rates, which can lead to a decrease in the demand for long-term bonds.