This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

Yield Curve Definition

Dictionary of Financial Terms

A yield curve is a chart of bond yields from the shortest-maturity issues to the longest-maturity ones.

The Treasury yield curve, for example, graphs the yields of the three-month bill, the six-month bill, the yearbill, the two-year note, the five-year note, the 10-year note and the 30-year bond at a point in time.

Normally, yield curves are positively sloped, meaning that the longer the maturity, the higher the yield. Investors normally demand higher yields from long-maturity bonds as compensation for interest-rate risk.

However yield curves can become negatively sloped, or inverted, with long-term yields lower than short-term ones, under certain circumstances. Normally, yield curves invert when investors believe that economic growth will slow. Slow growth could prompt the Fed to cut the fed funds rate, causing short-term bond yields to fall in sympathy. Investors become willing to buy long-term bonds at lower yields than short-term ones because they believe money invested in short-term issues will ultimately face the prospect of being reinvested at much lower yields.

The Treasury yield curve became partially inverted in early 2000 for reasons having as much to do with supply and demand as with economic expectations. The Treasury began conducting buybacks of long-maturity issues, causing their prices to rise (and yields to fall) relative to short-maturity ones as the supply began to dry up.

Definitions of Financial Terms

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
DOW 16,435.64 +27.10 0.17%
S&P 500 1,869.18 +4.33 0.23%
NASDAQ 4,111.3560 +15.84 0.39%

Brokerage Partners

Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs