Why this happen

SEE: financial meltdown 2k8

>>2893018
housing market mania

I thought it could be related to that, but what's the financial reason? Suddenly the 1 month bill became riskier that a 10 year bond? Or could be related to a lower demand for bills?

anyone? :)

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32KB, 500x579px

This was a financial "flight to safety" in the wake of economic cataclysm. Bills ensure more liquidity sooner so if you want to temporarily park your cash int he sanctuary of US debt, why pick the 10 year bond over a 1 month bill?

Also there was the fact that the US government itself wanted liquidity so they could do overnight loans to large banks so that they could meet core capital requirements.

>>2893785
Thanks for the answer, I understand the flight to safety, but shouldn't yields of the bills decrease instead of increase before a raise in the demand?
Or am I missing something ? :s

>>2893018
An inverted yield curve is when the yields on bonds with a shorter duration are higher than the yields on bonds that have a longer duration. It typically only happens with Treasury note yields. That's when yields on one-month, six-month or one-year Treasury bills are higher than yields on 10-year or 30-year Treasury bonds.
What Does an Inverted Yield Curve Mean?
An inverted yield curve means that investors have little confidence in the economy. They would prefer to buy a 10-year Treasury note and tie up their money for ten years even though they receive a lower yield.
An inverted yield curve means investors believe they will make more by holding onto the longer-term bond than if they bought a short-term Treasury bill.
If they believe a recession is coming, they expect the value of the short-term bills to plummet sometime in the next year. That's because the Federal Reserve usually lowers the fed funds rate when economic growth slows.
So why does the yield curve invert? As investors flock to long-term Treasury bonds, the yield on those bonds lower. That's because they are in demand, so they don't need as high a yield to attract investors. The demand for short-term Treasury bills falls, so they need to pay a higher yield to attract investors.
The Treasury yield curve inverted before the recessions of 2000, 1991, and 1981. The yield curve also predicted the 2008 financial crisis

FED tanked interest rates, very quickly. Making the 10 year bill look more attractive than the 1-month, whose "real" rate of return after inflation is literally negative

>>2893018
people were really scared and didn't trust they would be paid back

>>2895038
>>2895075
>>2895083

Thanks ! I think I got it.

Khan academy has a video specifically on this but yes basically means people think that the economy is going down the shitter