Since World War II, every occurrence of a yield curve inversion has been followed by a recession within the next six to 18 months.
An , sometimes called a negative yield curve, is when interest rates on long-term debt are lower than on short-term debt. Normally investors would seek higher interest rates on longer-term debt to compensate for increased risk. Yield curve inversions have .
At present, the US Treasury yield curve is inverted: short-term interest rates for one-year maturities are exceeding those for ten-year maturities. Since 1982, the United States has experienced five recessions, and in every case, the gap between the 10-year and 1-year interest rates turned negative before the economy started to decline. This trend was also briefly observed in 2020. Importantly, the present yield curve inversion is the most pronounced since 1982.
Unlike the US, where yield curve data has been monitored for a longer period, tracking for triple-A-rated Eurozone governments began in December 2006. The curve flipped for the first time since December 2022 and has continued to deepen.
Meanwhile, the UK has also seen its yield curve turn upside down for the last nine months.
These indicators, along with the that indicates a shrinking Eurozone economy, suggest an increased risk of recession.
This outlook is supported by recent coverage from financial media outlets such as the and , as well as insights from market analysts at and .