What Is the Yield Curve?
The yield curve shows the interest rates on bonds of the same credit quality across different maturities, usually US Treasuries. What its shape means, what an inverted curve is, and how good a recession signal it has been.
In one sentence
Yield curve. A chart of interest rates on bonds of the same quality across different maturities, from short-term to long-term.
How it works
Plot the yields on Treasuries from one month to 30 years against their maturities and join the points: that's the yield curve. The Treasury builds its official curve from market prices of recently issued securities, and a mathematical method fills in a smooth curve between those points.1
| Shape | 3 months | 2 years | 10 years |
|---|---|---|---|
| Upward-sloping | 3.0% | 3.6% | 4.4% |
| Flat | 4.2% | 4.2% | 4.3% |
| Inverted | 5.2% | 4.6% | 4.0% |
Usually longer bonds pay more. When short-term rates rise above long-term ones, the curve is inverted.
What the shape says
Long-term yields depend partly on where short-term rates are expected to go. An inverted curve can mean the market expects rates to fall, often because it expects the economy to weaken. Inversions have historically come before US recessions, and the Federal Reserve Bank of New York publishes a model that uses the gap between long and short yields to estimate the chance of a recession a year ahead.2
The record has limits. The inversion that began in October 2022 was the longest since at least 1989,3 and no recession had been dated by October 2026.4 The Yield Curve in Depth goes through every case.
Learn it properly
- Duration and the Yield CurvePart 2: What You Can Own
Notes and sources
- U.S. Department of the Treasury. Treasury Yield Curve Methodology. Checked 2026-10-12. Back to text
- Federal Reserve Bank of New York. The Yield Curve as a Leading Indicator. Checked 2026-09-30. Back to text
- Federal Reserve Bank of St. Louis (FRED), from the Board of Governors of the Federal Reserve System. Treasury Constant Maturity yields, daily (series DGS3MO, DGS1, DGS2, DGS5, DGS10, DGS30), through October 8, 2026. Checked 2026-10-12. Back to text
- National Bureau of Economic Research. Business Cycle Dating Committee Announcements. Checked 2026-10-14. Back to text