What Is the Yield Curve?
The yield curve is a line showing the interest rates on government bonds of different lengths, from a few months to 30 years.
A normal yield curve
Normally, longer loans pay higher rates. Lenders want extra reward for tying up money longer. So the curve slopes upward from left to right.
An inverted yield curve
Sometimes short-term rates rise above long-term rates. The curve flips upside down. This usually happens when the Federal Reserve pushes short rates up and investors expect slower growth ahead.
Why it is watched as a warning
In the US, an inverted yield curve has come before most recessions of the past 50 years. But the timing varies a lot, often a year or more later, and it has given false alarms. It is a warning light, not a clock.
See it in real companies
Open a company to see what it sells and how it makes money.