Fear of Recession
A recession is when the economic activity of a country declines which affects businesses negatively because of consumers wanting to spend less money. The short terms bonds are yielding more interest than long term bonds which indicates an inverted yield curve. This inverted yield curve could signal a recession happening in the US economy within the next year because of uncertainty in the economy. Investors are willing to invest more in long term bonds than in short term bonds causing a higher demand in long term bonds which decreases their yield while the Federal Reserve would increases the yield for short-term bonds to help the economy grow. An example of an inverted yield curve leading to a recession is when in 2006, there was an inverted yield curve for most of the year which led up to the big recession in 2007.