This so-called "upside down yield curve" returned to normal on October 11, which may be interpreted as a sign that investors are becoming more optimistic about the economy. The upside down of yield curve refers to that the yield of short-term bonds is higher than that of long-term bonds.
But there may also be technical reasons for the change, so some experts warn that the economy may remain fragile.
"There's no guarantee that we're in a safe area," said Nikol Hearn, macro strategist at TS Lombard. "A lot could happen in the next few years."
**Recession observation**
Long term bond yields are usually higher than short-term bond yields, because investors usually demand higher returns before they are willing to lock in their savings in the longer term.
Sometimes the yield on long-term debt is lower than that on short-term debt. This upside down usually implies that investors are so worried about the future that they are willing to hold long-term bonds even when the yield is very low, because long-term bonds are generally considered to be safer than stocks and other investments.
What scares investors is not just the rate of return hanging upside down, but the situation that follows. Since 1955, the yield curve has been inverted before every recession in the United States, although sometimes it has been inverted several years before the recession begins.
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