An inverted yield curve is when short-term Treasury note yields are higher than long-term Treasury bond yields. This means that investors prefer to purchase 10-year Treasury notes, at a lower yield, than a 2-year Treasury bond. (See What Are Treasury Bills, Notes and Bonds? for a definition of Treasury notes.)

Why is this important? The U.S. economy has had an inverted yield curve for about a year now. This also happened before the recessions of 2000, 1991, and 1981.

Find out why many experts aren't worried about the inverted yield curve.