Angie · learn
Yield curve
Government bond yields plotted against maturity. It normally slopes up, and its inversion has preceded most recessions, though not on any useful schedule.
Updated 2026-09-05
The yield curve plots government bond yields against their maturities. It normally slopes upward, because lending for longer carries more uncertainty and should pay more.
An inversion, where short rates exceed long ones, means the market expects rates to fall, which usually means it expects the economy to weaken. It has preceded most US recessions, which has made it famous, and it does so on a lag of anywhere from six months to two years, which makes it close to useless as a timing tool.
See also
- Risk-free rate — The 10-year Treasury yield, standing in for the return available with essentially no risk. Every other rate in the model is built on top of it.
- Fed funds rate — The overnight rate banks charge each other, targeted by the Federal Reserve. It is the short end of the curve every other rate is priced from.
- Recession — A meaningful, broad decline in economic activity lasting more than a few months. Dated formally after the fact, which is of limited use while you are in one.
- Yield to maturity — The total return on a bond held to the end, counting both interest and the pull toward face value. It is the bond's internal rate of return.
Educational content, not investment advice. Angie explains how a valuation is built so you can judge it yourself. What you do with that is your call.
