Investing.com - The rise of the yield on the 10-year Treasury note to 3% was unnerving for some investors, but there is a more ominous development underway in the credit markets of far greater consequence. That's the narrowing of the yield curve, which is the difference, or spread, between short- and long-term interest rates.One closely-watched pair of rates is the 2- and 10-year Treasury notes.The yield curve between the two is the smallest it has been in 10 years, which was right before the last recession. Market watchers are worried that it may eventually become inverted, meaning short-term rates are higher than long term rates.History shows that if the yield curve becomes inverted, the economy falls into recession in the next 6 to 24 months.Some say the flattening is normal when the Federal Reserve is raising interest rates and it does not necessarily mean a progression to an inversion. Others say it is just a matter of time that it does.
