Inverted Yield Curve: Largest Gap Since 1981

An inverted yield curve is often seen as a warning that a recession is looming. Longer-term yields are usually higher than shorter-term yields because investors want to guard against the risk of unexpected inflation and rate increases.

The yield on the 10-year Treasury note dropped to 0.78 percentage points below the two-year yield, the largest negative gap since 1981, before easing slightly. The inversion reflects both surprising positive news on inflation as well as the view that the Federal Reserve will continue to raise interest rates and keep them at elevated levels.