Normally long-term bonds have higher interest rates than short-term bonds, because investors need to be paid more money to take the risk of locking up their money for longer time period. The exception is that when you expect interest rates to fall in the near future, it makes more sense to hold long-term bonds, because you lock in today's rates for a longer time period, while the investor that picks up 2 year bonds will have to roll them over at whatever they can get in two years. That bids up the price of long-term bonds, which makes the effective interest rate fall. This situation is called an "inverted" yield curve, because it is the opposite of the normal situation.
A "deinverted" yield curve is when you have an inverted yield curve but the difference suddenly goes positive again. That's the situation we're in now, as you can see from the graph. And usually you get into that situation because the scenario investors feared actually happens: short-term interest rates drop, partially as a response from the Fed to inject more money into the economy and stave off the recession, and partially because stocks become very risky in a recession and so investors flee them and go to short-term bonds instead to preserve capital.
The deinverting isn’t so much due to the Fed injecting money as it is an anticipation the Fed will inject money by cutting rates in the coming future. The 2 year yield drops in anticipation of the Fed dropping interest rates in the next couple years. That’s what makes it a leading indicator.
https://fred.stlouisfed.org/series/T10Y2Y
Normally long-term bonds have higher interest rates than short-term bonds, because investors need to be paid more money to take the risk of locking up their money for longer time period. The exception is that when you expect interest rates to fall in the near future, it makes more sense to hold long-term bonds, because you lock in today's rates for a longer time period, while the investor that picks up 2 year bonds will have to roll them over at whatever they can get in two years. That bids up the price of long-term bonds, which makes the effective interest rate fall. This situation is called an "inverted" yield curve, because it is the opposite of the normal situation.
A "deinverted" yield curve is when you have an inverted yield curve but the difference suddenly goes positive again. That's the situation we're in now, as you can see from the graph. And usually you get into that situation because the scenario investors feared actually happens: short-term interest rates drop, partially as a response from the Fed to inject more money into the economy and stave off the recession, and partially because stocks become very risky in a recession and so investors flee them and go to short-term bonds instead to preserve capital.