Glossary
Yield curve
A plot of bond yields across different maturities, most often for government debt of a single issuer.
Also called: term structure of interest rates
The yield curve plots the interest rates, or yields, on bonds of the same credit quality across a range of maturities, most commonly U.S. Treasury securities from short-term bills to long-term bonds. Its shape summarizes what the bond market currently expects about future interest rates, growth, and inflation.
A "normal" upward-sloping curve, where longer maturities yield more than shorter ones, reflects the usual premium investors demand for tying up money longer. An "inverted" curve, where short-term yields exceed long-term yields, has historically preceded economic slowdowns in many though not all cycles, because it implies the market expects rates, and often growth, to fall. The curve is distinct from a single bond's yield, and from bond duration, which measures a bond's price sensitivity to changes in the curve rather than the curve's shape itself.
Analysts watch the yield curve as a real-time gauge of market expectations and as an input to pricing other fixed-income instruments, including credit spreads measured over the relevant government benchmark, and to interpreting inflation releases such as the consumer price index. A common pitfall is treating an inversion as a precise, mechanical recession signal: the lag between inversion and any downturn has varied considerably across historical episodes, and not every inversion has been followed by one.
Last reviewed September 22, 2026