On the other end of the chart are longer-term Treasurys, which take 10 years or decades to mature.
But when investors are worried the economy will fall sharply, perhaps because the Fed is pushing short-term rates too high too aggressively, they’re willing to accept less for a Treasury maturing many years in the future.
Others market observers, including officials at the Federal Reserve, view the relationship between the 3-month and 10-year Treasurys to be the more important one.
Though they don’t have as good a record of success predicting recessions as the three-month yield versus the 10-year, they show the trend is swinging toward pessimism.
The last time the two-year yield topped the 10-year yield, it took less than a year before the global economy plunged into recession.
The central bank has already pulled its key overnight rate off its record low, the first increase since 2018, in hopes of beating down high inflation.
Banks, for example, make money by borrowing money at short-term rates and lending it out at longer-term rates.
No, an inverted yield curve has sent false positives before.
Some market watchers have also suggested the yield curve is now less significant because herculean actions by central banks around the world have distorted yields.