# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Yield Curve

What is a Yield Curve?

In simple terms, the yield curve shows the price of borrowing money in the bond market. The curve shows the relationship between yields and maturity dates for a set of similar bonds at a given point in time.

In a "normal" yield curve, long-term yields are higher than short-term yields. This makes sense because the longer someone borrows your money, the more you would expect them to pay you in interest. When the yield curve is inverted, short-term yields are higher than long-term yields, meaning that you get no additional yield for lending your money for longer.

The short end of the curve is fairly straightforward: This is the part over which the Fed exercises more direct control through the Fed funds rate. What happens at the long end of the yield curve gets complicated, though. This is the part of the curve that is more influenced by investors' expectations, including market sentiment and inflation expectations.

Sponsors Center
Sponsored Links