Glossary

The yield curve is a graphical representation of the interest rates (or yields) on debt for a range of maturities. 📈

It is typically used to show the difference in yields for government bonds, like U.S. Treasuries or UK Gilts, with varying time horizons. The curve helps investors understand the relationship between interest rates and the time to maturity, providing insights into market expectations for future interest rate movements and economic conditions.

Example: A normal yield curve slopes upward, indicating that long-term interest rates are higher than short-term rates, as investors usually demand higher yields for holding bonds over a longer period.

Fun fact: An inverted yield curve, where short-term interest rates are higher than long-term rates, is considered a reliable predictor of an upcoming recession, as it suggests that market participants expect lower growth and inflation in the future. However, it's essential to remember that correlation doesn't necessarily imply causation, and other factors can also influence the shape of the yield curve. 🌩️