FREE Guide - 5 Chart Patterns You Need to Know!

Inverted Yield Curve

What does Inverted Yield Curve mean?

The yield curve which moves downward. It is also called a negative yield curve, as in this market situation lower term bonds carry lower interest rates compared to short term bonds.

Futures Knowledge Explains Inverted Yield Curve

Yield Curve is a line graph of maturity period of bonds and their interest rates. The maturity period of bonds such as the three-month, two-year, five-year and 30-year is shown on x axis and their interest rates on y axis. Normally the long duration bonds carry higher risk and so have higher interest rate. The yield curve normally moves upward. But if the economic outlook is not positive, short-term interest rates become higher than long-term rates. The yield curve moves downward and its shape inverts.

The inverted yield curve is a bearish indicator and may signal coming recession. For example, just before 2008 crisis, US money market witnessed inverted yield curve.

Get Your FREE Technical Analysis Guide!
Timing is everything, and with this guide, you'll learn how technical analysis can help find the right time to enter and exit your futures trades. Nearly 30 explanations and examples of the most popular technical analysis tools are all in this one handy guide. It's like having a futures trading mentor at your side!