Investing Dictionary
Options & Bonds

What is Yield Curve?

A graph showing interest rates at different loan lengths

Full Explanation

The yield curve shows interest rates on bonds ranging from short-term (3 months) to long-term (30 years). Normally, longer bonds pay more. When it "inverts" (short-term higher than long-term), it's historically predicted recessions.

Pro Tip

An inverted yield curve has preceded every US recession in recent decades — one of the most watched economic signals.

Related Options & Bonds Terms

Covered Call

Selling someone else the right to buy your stock at a higher price

Credit Rating

A grade for how likely a borrower is to repay their debt

Bond

A loan you give to a company or government that pays you interest

Implied Volatility

The market's expectation of how much a stock will move

View all Options & Bonds terms →

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