Editing Yield curve (section)

====Inverted yield curve====
{{main|Inverted yield curve}}

[[File:Inverted yield 30 year - 3 month.webp|thumb|400px|right|{{legend-line|blue solid 3px|30 year treasury minus 3 month treasury bond}} ]]
[[File:FFR treasuries.webp|thumb|400px|right|
{{legend-line|#F5A623 solid 3px|[[Mortgage loan|30 year mortgage average]]}}
{{legend-line|#F8E71C solid 3px|[[treasury bond|30 Year Treasury Bond]]}}
{{legend-line|#000000 solid 3px| 10 Year Treasury Bond}}
{{legend-line|#9013FE solid 3px| 2 Year Treasury Bond}}
{{legend-line|#4A90E2 solid 3px| 3 month Treasury Bond}}
{{legend-line|#D0021B solid 4px| Effective Federal Funds Rate}}  
{{legend-line|#E786F9 solid 4px| [[United States Consumer Price Index|CPI inflation]] year/year}}
{{color box|lightgrey}} [[List of recessions in the United States|Recessions]]
]]

Under unusual circumstances, investors will settle for lower yields associated with low-risk long-term debt if they think the economy will enter a recession in the near future. For example, the [[S&P 500 Index|S&P 500]] experienced a dramatic fall in mid 2007, from which it recovered completely by early 2013. Investors who had purchased 10-year Treasuries in 2006 would have received a safe and steady yield until 2015, possibly achieving better returns than those investing in equities during that volatile period.

Economist [[Campbell Harvey]]'s 1986 dissertation<ref>{{Cite web|url=https://faculty.fuqua.duke.edu/~charvey/Research/Thesis/Thesis.htm|title=Campbell R. Harvey's Dissertation|website=faculty.fuqua.duke.edu}}</ref> showed that an inverted yield curve accurately forecasts U.S. recessions. An inverted curve has indicated a worsening economic situation in the future eight times since 1970.<ref>{{Cite web|url=https://faculty.fuqua.duke.edu/~charvey/Term_structure/|title=Index of /~charvey/Term_structure|website=faculty.fuqua.duke.edu}}</ref>

In addition to potentially signaling an economic decline, inverted yield curves also imply that the market believes inflation will remain low. This is because, even if there is a recession, a low bond yield will still be offset by low inflation. However, technical factors, such as a [[flight to quality]] or global economic or currency situations, may cause an increase in demand for bonds on the long end of the yield curve, causing long-term rates to fall. Falling long-term rates in the presence of rising short-term rates is known as "Greenspan's Conundrum".<ref>{{cite web|author1=Daniel L. Thornton|title=Greenspan's Conundrum and the Fed's Ability to Affect Long-Term Yields|url=https://research.stlouisfed.org/wp/2012/2012-036.pdf|website=Working Paper 2012-036A|publisher=FEDERAL RESERVE BANK OF ST. LOUIS|access-date=3 December 2015|date=September 2012}}</ref>