Yield curve

A graph of yields on comparable debt securities across different maturities at a given time. Its shape summarizes how borrowing costs vary with the time until repayment.

Term structure of interest rates: The relationship between interest rates or yields and the maturities of debt instruments. The yield curve is the graphical expression of this broader maturity-yield relationship.
Yield curve control: A central-bank policy that targets yields at specified maturities through asset purchases or other interventions. It shows how monetary authorities can directly influence selected points on the curve.
Normal yield curve: A yield curve that slopes upward, with higher yields at longer maturities than at shorter ones. This common shape reflects some combination of expected rates and term compensation.
Par yield curve: A curve of coupon rates that would make bonds of different maturities trade at par value. Unlike a spot curve, it reports par-equivalent coupon rates rather than zero-coupon yields.
Recession prediction: The use of economic indicators to estimate the likelihood and timing of an economic recession. Yield-curve inversions have historically preceded some recessions, but do not determine their timing.
Expectations hypothesis: A theory that long-term interest rates reflect expected future short-term interest rates. It explains how anticipated policy-rate changes can tilt the curve.
Bond valuation: The process of estimating a bond’s present value from its promised cash flows and market discount rates. Yields along the curve discount cash flows with different payment dates.
Inverted yield curve: A yield curve in which shorter-maturity yields exceed longer-maturity yields. Its inversion is closely watched as a possible signal of weaker future activity.
Spot rate curve: A curve of yields on zero-coupon investments for different maturities. It isolates maturity-specific discount rates, while quoted benchmark curves may use other yield conventions.
Term spread: The yield difference between longer-term and shorter-term debt securities. A chosen term spread compresses the curve’s slope into a recession-monitoring indicator.

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