15. What is a Yield Curve

What is a yield curve?

• x-axis: Terms (years)
• y-axis: Yield (%)
• Generic positive yield curve (natural)
• Generic flat yield curve
• Generic inverse yield curve (very rare)

How can I use a yield curve to predict market behavior?

• Yield curves are a valuable tool that help investors understand how the federal government is trying to steer the economy.
• Flat and inverse yield curves mean that the FED wants to slow down the economy.
• Positive one implies that the FED wants to stimulate the economy.