Financecalendar_todayLast updated: Apr 2026
What is Yield Curve?
/jiːld kɜːv/
A graph showing the relationship between interest rates and the maturity of bonds of similar credit quality. Its shape — normal, flat, or inverted — is one of the most powerful predictors of economic conditions.
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Everyday Example
Normally, a 10-year government bond pays more interest than a 1-year bond — you're lending money for longer, so you demand more. When this flips (short-term rates exceed long-term), the curve "inverts" — a red flag.
publicReal-World Application
“An inverted yield curve has preceded every US recession since 1955, with only one false positive. When it inverted in 2019, economists took note; the 2020 recession followed. Markets watch it as the most reliable recession indicator.”
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Did you know?
The yield curve was first systematically studied after the 1958 US recession. Economist Campbell Harvey demonstrated its predictive power for recessions in his 1986 dissertation — a finding that has held for nearly 40 years.
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Key Insight
The yield curve works because it reflects market expectations about future growth and inflation. When investors expect a recession, they rush into long-term bonds (safety), pushing their yields down below short-term rates.
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