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On rare occasions, the yield curve can flip (invert) when the yield of shorter-term treasury bonds surpass that of longer-term bonds. Higher yields for short-term bonds means that investors are selling and the price for those securities is falling.
Above is the current yield curve, courtesy of Bloomberg. As you can see from the table at the bottom, the curve has already begun to invert. The 3 year treasury bond is already yielding higher than the 5Y, 7Y, 10Y and 30Y.
This is because it’s a signal of investors losing confidence in the near-term health of the economy. A loss of confidence usually results in capitulation which can be enough to pop debt bubbles.
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