Recently, on 25th March 2019, markets started panicking due to the yield curve inverting, where the 10-year yield dipped below the 3-month yield.

Markets started fearing a looming recession.

Normally, yield curves should all slope upwards. This is because, all things being equal, people would demand higher interest rates for longer duration loans. Given that longer-term loans have various risks involved when lending (e.g. inflation risk) and the risks gets riskier over longer time horizons.

So for the curve to invert implies that investors are forecasting that something unusual will happen. Something that will push future interest rates down low enough to justify long-term yields being low despite the risks. Something like the FEDs reducing interest rates to spur economy activity.

In other words, a future recession.

While this article is a little late, I thought I