An inverted curve means...

Short-term rates are above long-term ones

An inverted yield curve is...

A warning sign, not a guarantee

Their money is tied up longer, with more risk

Lending for 10 years usually pays more than lending for 3 months. The yield curve shows how much more, and markets watch it like a weather forecast.
It's a line joining the interest rates (yields) on government bonds from short to long terms: 3 months, 2 years, 10 years, 30 years.
Normally it slopes up. Lenders want more for tying up money longer, and they expect growth and some inflation ahead.
When short-term rates rise above long-term ones, the curve is inverted. It usually means the central bank is squeezing hard and investors expect rates and growth to fall later.
Track record: in the US, an inverted curve came before every recession since the late 1960s, usually 6 to 24 months ahead.
Common mistake
But it's not a promise. The US curve was inverted from 2022 to 2024, the longest stretch on record, and the economy kept growing through 2024.
Key takeaway
Normal curve: calm. Inverted curve: a warning light, not a guaranteed recession.

Normally, long-term interest rates are... Higher than short-term ratesLenders usually want extra pay for locking money away for longer.
An inverted curve means... Short-term rates are above long-term onesThe usual upward slope flips, often because the central bank has pushed short rates high.
An inverted yield curve is... A warning sign, not a guaranteeIt has a strong record, but the 2022–24 inversion wasn't followed by a US recession.
Why do lenders usually want more for 10 years than for 3 months? Their money is tied up longer, with more riskMore time means more chances for inflation, rate changes and surprises.