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Expand chart
Data: U.S. Treasury; Graphic: Chris Canipe/Axios

The U.S. Treasury yield curve has now been inverted for more than a month — meaning the 3-month bill is paying a higher interest rate than the 10-year note.

Why it matters: An inversion of Treasury bond yields is a near-perfect recession indicator that economists at the Federal Reserve recently called "the best summary measure" for an economic downturn.

How it works: Investors demand higher payment for loaning out money for longer periods of time. Bonds are essentially loans, so it follows that a bond that does not return a lender's cash for 10 years would pay more than one that returns the cash in 3 months.

  • An inversion of the Treasury curve means the exact opposite is happening. Either investors see a higher chance they'll get paid back in 10 years than in 3 months by the U.S. government (the world's most secure borrower), or they see inflation being so flat that money invested today will be worth a little less in 10 years than it is worth in 3 months.
  • Neither says positive things about the market's view of the economy.
  • The yield curve inverted in March and in May, but for very short periods of time, and other parts of the curve inverted as far back as December.

Yes, but: It's not time to put money under the mattress just yet. Many market watchers, including top economists and some of the world's biggest asset managers, believe that the extraordinary measures the Fed took after the Great Recession have fundamentally altered the market and things are different this time.

There is a bright spot: An inversion doesn't signal a recession is coming immediately. Typically, it takes 6 to 24 months after an inversion for a recession to begin, and stocks perform well.

Go deeper

3 hours ago - World

U.S. and NATO answer Putin in writing while bracing for Ukraine invasion

NATO Secretary-General Jens Stoltenberg. Photo: Dursun Aydemir/Anadolu Agency via Getty

The U.S. and NATO provided Russia with written proposals on Wednesday to advance a "diplomatic path forward," even as they warned that Russia could invade Ukraine within days.

Why it matters: This is a delicate diplomatic balancing act. The U.S. and NATO want to show they're serious about diplomacy but unwilling to compromise on "core principles" — all without providing Vladimir Putin with an additional pretext for escalation.

The political leanings of the Supreme Court justices

Data: Martin-Quinn scores; Chart: Axios Visuals

The Supreme Court will continue to have a solid conservative majority even with Justice Stephen Breyer's retirement.

How to read the chart: An analysis by political scientists Andrew Martin and Kevin Quinn, known as the Martin-Quinn Score, places judges on an ideological spectrum. A lower score indicates a more liberal justice, whereas a higher score indicates a more conservative justice.

The front-runners for Biden's Supreme Court pick

Judge Kentaji Brown Jackson (left) and Justice Leondra Kruger (right) Tom Williams-Pool/Getty Images and Lonnie Tague, US Department of Justice

Two highly accomplished Black female judges — Ketanji Brown Jackson, a judge on the D.C. Circuit Court of Appeals; and Leondra Kruger, a justice on the California Supreme Court — are seen as the early front-runners to replace retiring Supreme Court Justice Stephen Breyer.

The big picture: Jackson is a powerful federal judge with a record that progressives feel they can trust. Kruger was a highly regarded litigator and has carved out a reputation for working well with conservative judges.