Phenomenon when shorter term bonds yield higher interest rates than longer term bonds
In finance, an inverted yield curve is a yield curve in which short-term debt instruments (typically bonds) have a greater yield than longer term bonds. An inverted yield curve is an unusual phenomenon; bonds with shorter maturities generally provide lower yields than longer term bonds.[2][3]
To determine whether the yield curve is inverted, it is a common practice to compare the yield on the 10-year U.S. Treasury bond to either a 2-year Treasury note or a 3-month Treasury bill. If the 10-year yield is less than the 2-year or 3-month yield, the curve is inverted.[4][5][6][7]
^Bodie, Zvi; Kane, Alex; Marcus, Alan J. (2010). Essentials of Investments (Eighth ed.). New York: McGraw-Hill Irwin. pp. 315–317. ISBN978-0-07-338240-1.
^Melicher, Ronald W.; Welshans, Merle T. (1988). Finance: Introduction to Markets, Institutions and Management (7th ed.). Cincinnati OH: South-Western Publishing Co. p. 493. ISBN0-538-06160-X.