What is an Inverted Yield Curve and Why it Matters

Updated: Feb 14, 2019

You've heard it a lot in the media lately, "we're seeing an inverted yield curve", but what exactly does that mean and more importantly why does it matter.

A yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality but differing maturity dates. The most frequently reported yield curve compares the three-month, two-year, five-year, 10-year and 30-year U.S. Treasury debt. This yield curve is used as a benchmark for other debt in the market, such as mortgage rates or bank lending rates, and it is used to predict changes in economic output and growth.

An inverted yield curve is an interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the same credit quality.

So what's the big deal you ask? Because it is a predictor of a recession. So are we close and how should you prepare your retirement portfolio. #invertedyieldcurve #recession #yieldcurve #retirementplanning

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