What is Yield Curve?
The yield curve plots interest rates of bonds with equal credit quality across different maturities — its shape signals market expectations about the economy.
Formula
Plot: X-axis = bond maturity (3M to 30Y), Y-axis = yield. Normal = upward sloping.
How to Interpret
Normal (upward) = healthy economy. Inverted (downward) = recession warning. Flat = uncertainty. The yield curve is one of the most reliable recession predictors.
Typical Ranges
Normal spread (10Y - 2Y): 1-2.5%. Inversion has preceded every US recession since 1970.