Yield curve

A yield curve is a graph or line that plots the yield of bonds with different maturities. The yield curve shows the relationship between short-term and long-term interest rates; it illustrates the term structure of interest rates. The curve typically slopes upward from left to right, with short-term rates on the left and long-term rates on the right. The yield curve is important because it provides valuable information to investors, policymakers, and economists about the state of the economy. The slope of the yield curve is often seen as a predictor of future economic activity. A steep yield curve, with high long-term interest rates, indicates expectations of a strong economy with higher inflation and higher interest rates in the future. A flat yield curve, with short-term rates similar to long-term rates, suggests a weakening economy and/or expectations of lower inflation and interest rates in the future. An inverted yield curve, where short-term rates are higher than long-term rates, is often seen as a warning sign of an impending recession.