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The yield curve was once only an insignificant graph for academics and policy makers. But in recent years, it has become a way of predicting impending recessions.
The curve predicted each recession in the last 50 years. This means that the curve has accurately predicted even largely unexpected slowdowns, such as the 2001 Internet bubble and the 2007 Great Recession.
As a result, reversal information on the yield curve can now tip the markets. Decision-makers closely monitor even small changes in the composition of the curve.
How has this chart showing interest rates on US Treasury bonds evolved to become one of the most reliable recession indicators we have? And what does it really mean to invert the yield curve?
Watch the video above to learn more about how experts use the yield curve as a key indicator of the recession.
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