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A graph showing the relationship between bond yields and maturities, typically plotting U.S. Treasury yields from short-term to long-term.
A normal yield curve slopes upward, with longer maturities offering higher yields to compensate for the additional risk of tying up money for longer periods. A flat yield curve suggests economic uncertainty. An inverted yield curve (where short-term rates exceed long-term rates) has historically been one of the most reliable recession predictors, preceding every U.S. recession since 1955 with only one false signal. The curve inverts when investors expect the Fed to cut rates in the future due to economic weakness. The spread between the 10-year and 2-year Treasury yields is the most commonly watched measure of curve shape.