Last week's very brief yield curve inversion has increased investor concern, but one expert is calling for cooler heads to prevail.
"I think there are some misconceptions about what yield curve inversions are and what they mean," says Marcus & Millichap's John Chang in a new video. A yield curve inversion happens when short-term Treasury rates pay a higher interest rate than long-term Treasuries, and the most commonly tracked version of this is the 2/10 yield spread. That refers to the difference between the two-year Treasury and the ten-year Treasury.
"Many believe a yield curve inversion means a recession is coming, and you may see that in the news a lot in the coming weeks," Chang says. "But I need to point out that an inverted yield curve is just one indicator and it's not bulletproof."
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