The yield curve plots the yields of one issuer's government bonds across different maturities, from short-term bills to long-dated bonds. Its shape summarises what the market expects from growth, inflation and central bank policy.
An upward-sloping curve is considered normal. A flat or inverted curve — where short-term yields sit above long-term ones — has historically been read as a sign that investors expect slowing growth and eventual rate cuts. Forex traders watch the curves of both economies behind a pair, because the short end tracks policy expectations while the long end reflects growth and inflation premia. Divergence between two countries' curves, or a sharp steepening, often precedes sustained currency trends.
Yield Curve
The yield curve maps government bond yields across maturities, summarising the growth, inflation and rate expectations that move currencies.
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