"A 5-year bond now has a lower yield than a 3-year bond? How is that even possible? Wouldn't anyone who wants a 5-year bond just buy a 3-year bond and then put

"A 5-year bond now has a lower yield than a 3-year bond? How is that even possible? Wouldn't anyone who wants a 5-year bond just buy a 3-year bond and then put the cash under their mattress after 3 years?" Your confusion is precisely why it's a bad thing. Ideally, longer-term bonds have a higher yield, as that would mean we collectively are investing in high growth over a long period of time. That is, the economy grows. When the inversion happens, then the short-term bonds have a higher yield, which means something is wrong with the economy in the long term. We don't know what's wrong with it, it's just a signal.