Definition of yield curve

A graphical representation of the relationship between the yields and maturities of different bonds of similar quality, currency denomination and risk (usually government bonds).

Normally a yield curve slopes upwards (a positive or normal yield curve), as one would expect longer-dated bonds to have a higher yield than shorter-term ones (because an investor should expect to earn more for taking on longer-term risk). If that situation is reversed, for instance because of an unusually high supply of short-term paper, the curve slopes downward (an inverted or negative yield curve).

A yield curve can also be flat (with little difference between short-term and long-term interest rates), depending on supply and demand or inflationary expectations.

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Yield curve watchers divided over bank power
US yield curve
Short View: US yield curve

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