Yield Curve
A plot of Treasury yields across maturities.
What is Yield Curve?
Normally upward-sloping, since longer lending demands more compensation. It flattens when the market expects slowing growth or rate cuts, and inverts when short yields exceed long ones.
Yield Curve: a worked example
2-year at 4.9% and 10-year at 4.2% is an inverted curve.
More terms in Macro & Markets
Inflation
A general rise in prices that erodes purchasing power.
Real vs. Nominal Return
Return after inflation versus the headline number.
Federal Funds Rate
The overnight interbank lending rate targeted by the Fed.
Monetary vs. Fiscal Policy
Central bank rate and money supply tools versus government tax and spending.
Yield Curve Inversion
Short-term yields exceeding long-term yields - a recession signal.
Recession
A significant, broad, sustained decline in economic activity.
Quantitative Easing
Central bank purchases of long-dated assets to push down long rates.
Gross Domestic Product (GDP)
The total value of goods and services produced in an economy.