Financial Glossary: Yield Curve


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Yield Curve

Yield Curve

Graph plotting the Interest rate of a given issuer for a Range of different maturities.

A graphic line chart that shows Interest rates at a specific point for all securities having equal Risk, but different maturity dates. For bonds, it typically compares the 2 or 5 year treasury with the 30 year.

Under normal circumstances, the longer it takes for a CD, Bond or other investment to mature, the greater the Yield, because people demand a greater return to tie up their money for a longer time. When the difference in rates between a Short-term investment and a Long-term one is reduced, the Yield curve flattens. When economic forces cause a shorter maturity to produce a greater Yield than a Long maturity, the Yield curve is said to be inverted.

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