An inverted yield curve marks a point on a chart where short-term investments in U.S. Treasury bonds pay more than long-term ones.
Getting more for a short-term than a long-term investment appears to make zero economic sense.
One reason inversions happen is because investors are selling stocks and shifting their money to bonds. They've lost confidence in the economy and believe the meager returns that bonds promise might be better than potential losses they could incur by holding stocks into a recession. So demand for bonds goes up and the yields they pay goes down.
First off, it may depend on how long the inversion lasts. A brief inversion could be just an anomaly. In fact, some inversions have not preceded recessions.
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