This article is about yield curves as used in finance. For the term's use in physics, see
yield curve (physics). In
finance, the yield curve is the relation between the
interest rate (or cost of borrowing) and the time to
maturity of the debt for a given borrower in a given
currency. For example, the current U.S.
dollar interest rates paid on U.S.
Treasury securities for various maturities are closely watched by many traders, and are commonly plotted on a graph such as the one on the right which is informally called "the yield curve." More formal mathematical descriptions of this relation are often called the term structure of interest rates.
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The graphical depiction of the relationship between the
yield on
bonds of the same credit quality but different
maturities. Related:
Term structure of interest rates.
Harvey (1991) finds that the inversions of the yield curve (short-term rates greater than long term rates) have preceded the last five U.S. recessions. The yield curve can accurately forecast the turning points of the business cycle.
A curve describing the relationship between the interest rate or yield and the maturity at a given point in time for debt securities with the same credit risk but different maturity dates. The slope of the yield curve can be measured as the difference between the interest rates at two selected maturities.
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