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Definition

The effective yield on debt instruments of different maturities. In general, the longer the maturity of a debt instrument (such as a government bond) the higher the effective yield on it. Drawn on a graph this results in the yield curve which rises with the time to maturity. Occasionally there is an "inverted yield curve" where the shorter maturity bonds yield more than the longer term ones - such as happened in the US between May and October 2019 and when the yield on the 10-year bond was higher than that on the 3-month bond. An inverted yield curve is thought to be a sign of an impending recession.

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