In the condition of an inverted yield curve (Yield is smaller in the longer term), the customer can sell long-term debt positions and buy short-term obligations. An inverted yield curve describes an abnormal decline in the yield on long-term debt over the yield on short-term debt of the same credit quality.
Often known as a negative yield curve, the inverted yield curve has proven in the past that it is relatively a reliable lead indicator of a recession. A yield curve graphically represents the yield on identical bonds at various maturities. It is also often known as the structure of interest rates. For example, the US Treasury issues daily Treasury bills and bond yields that can be charted as curves.
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