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Fixed Income & Macro·Yield Curves & Term Structure

The Yield Curve

10 min read

The single most-watched macro signal

The yield curve plots government bond yields against their maturities. Its shape encodes the market's collective expectation of future short rates (and thus growth and inflation). A steep curve typically signals strong growth; a flat curve signals a slowdown; an inverted curve (short rates above long rates) has preceded every US recession since 1955 with one false positive.

US Treasury — normal vs. invertedvs Normal (post-2010 avg)
5.60%4.20%2.80%1.40%0.00%0.25y1y2y5y10y30y
Solid line: inverted curve (short > long, recession signal). Dashed: normal upward-sloping curve.