Yield Curve
Definition
The yield curve plots the yields of bonds of the same credit quality — most commonly US Treasuries — across different maturities, from short-term bills out to long-term bonds. It is the market's snapshot of the price of money over time.
A normal curve slopes upward: investors demand extra yield (a term premium) to lock money up longer and bear more interest-rate risk. The curve's shape embeds expectations about future short-term rates, inflation, and growth, which is why it is watched as a macro signal.
Common reference points are the 2-year/10-year spread and the 3-month/10-year spread. Curves are described as steepening (long rates rising relative to short rates), flattening, or inverting.
Why interviewers ask
Markets-flavored interviews and sales & trading superdays routinely ask you to describe the current shape of the curve, why it looks that way, and what it implies for the economy or for bank profitability. Even in classic IB interviews it appears via the cost of debt, the risk-free rate in WACC, and 'what's going on in markets right now' questions — you should be able to sketch the curve and explain its drivers.
Related terms
Interviews don't test definitions — they test recall under pressure.
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