Historically, a flattening yield curve is a big fat warning sign that tough times are coming down the pike. On those rare occaisions when it has gone negative (short duration bonds having a higher yield than long term yields), a recession/depression has always followed. Other than getting quatloos directly from central banks, commercial banks have one primary source of profit, short term deposits that they pay low interest rates for, and turning around and lending money long term at higher rates. With a negative yield curve, they lose that source of profit.
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Thanks @ preparedwombat.
That makes a lot of sense.
So the banksters have to tighten the belt then....