Financial Quotient

What is yield curve?

A yield curve is a graphical representation of yields for a collection of bonds similar in credit quality but with different maturities. It can be considered as overall annual interest rate earned by investors who buy the bond today at the current price and receive all coupon and principal payments of the bond at maturity.

A yield curve is a very useful signal for assessing investors' expectation about future interest rates as reflected in the curve's shape.

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A version of this article appeared in the print edition of The Sunday Times on July 15, 2018, with the headline 'What is yield curve?'. Print Edition | Subscribe