Yield Curve
A line showing the interest rates on government bonds from short-term to long-term maturities.
In plain English
A line showing the interest rates on government bonds from short-term to long-term maturities.
The yield curve plots bond yields against time to maturity: three months, two years, ten years, thirty years. Normally it slopes upward, because lenders want more reward for tying up money longer.
Its shape tells a story. A steepening curve often reflects expectations of growth or inflation. A flat or inverted curve, with short-term rates above long-term ones, has historically come before many US recessions. The term spread is a common way to measure the slope.
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