An inverted yield curve, where short-term bonds yield higher interest than long-term ones, signals an upcoming recession due to investor pessimism and slowing capital velocity.
"if this curve inverts and we get a sloping downward curve that means that the shorter term bonds will yield a higher interest than the long-term ones and this can signal to investors that wait a minute things are scary we have no idea what's going to happen and so investors start to hold on to their money the capital velocity slows down people become pessimistic and this could signal to investors that a coming recession is going to happen"
