What Is A Yield Curve?

Reviewed by

Christy Grimste WSO Editorial Board

Expertise: Accounting | Real Estate

The yield curve is a chart plotting the yield of an asset against the maturity of the asset. Typically the yield curve is an upward line with decreasing gradient as maturity increases. This makes sense as assets with a longer maturity incorporate more uncertainty and therefore more interest is paid to compensate the additional time risk.

Sometimes the yield curve will invert, meaning the short-term yields are higher than the long-term yields. This basically means there is doubt about the ability of the issuer to survive short-term events, but if they do survive then their long-term stability is likely to be acceptable.

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Christy Grimste

Christy Grimste is a member of WSO Editorial Board which helps ensure the accuracy of content across top articles on Wall Street Oasis. . This content was originally created by member WallStreetOasis.com and has evolved with the help of our mentors.