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Immediately preceding the worst of the financial crisis, my professors all pointed out to me that the yield curve had inverted -- short-term yields were more risky than 20-year or 30-year Treasury securities. My professors all seemed nervous about this.

Aside from such a situation being generally counter-intuitive, why was this viewed so negatively? What kind of effects does this have, in a more macro sense?


migrated to quant.stackexchange.com by Turukawa Apr 28 '12 at 17:15

This question belongs on our site for finance professionals and academics.