Yield Curve
Definition
A graph showing the relationship between bond yields and their maturities, from short-term to long-term.
Explanation
The yield curve normally slopes upward — longer maturities offer higher yields to compensate for greater uncertainty. A flat yield curve (similar yields across maturities) suggests economic uncertainty. An inverted yield curve (short rates exceed long rates) has preceded every US recession since 1955. The Fed controls the short end (through the fed funds rate); the market sets the long end (through supply, demand, and inflation expectations). The 10-year minus 2-year Treasury spread is the most watched yield curve metric.