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- Recently,United States and UK yield curves had inverted for the first time since 2007 and 2008 respectively.This has led to the fear of global recession in the coming future.
- The yield curve is a graph showing the relationship between interest rates earned on lending money for different durations.
- A normal yield curve is one in which longer maturity bonds have a higher yield compared to shorter-term bonds due to the risks associated with time.
- However,inverted yield curve is one in which the shorter-term yields are higher than the longer-term yields which can be a sign of an upcoming recession.
- Recession is a slowdown or a massive contraction in economic activities, wherein economic indicators such as GDP, profits, employment tend to fall.