Yield Curve

The yield curve is a graph plotting the yields of bonds with equal credit quality — most commonly U.S. Treasuries — across different maturities, from short-term (3-month T-bills) to long-term (30-year T-bonds). A normal yield curve slopes upward, reflecting higher yields for longer maturities to compensate for greater duration risk and inflation uncertainty. A flat yield curve suggests economic uncertainty, while an inverted yield curve (short-term rates exceeding long-term rates) has historically signaled impending recessions. The yield curve is one of the most important indicators in finance, used for monetary policy analysis, bond trading strategies, economic forecasting, and as a benchmark for pricing loans and mortgages. Changes in its shape reflect shifts in growth expectations, inflation outlook, and monetary policy.