Yield curve is a graph charting the yield offered by bonds with the same credit rating, but with different maturity periods.
The most commonly used yield curve is the Government of India-issued bond yield curve. The maturity of these bonds can range from 91 days to 10 years.
Yield curves usually move upwards, with the idea being long-term bonds with 10-year maturity may be adequately compensated by higher interest rates.
A flat yield curve reflects uncertainty in the economy.
An inverted yield curve may be an early sign of a recession, as it could indicate investors moving their money from short-term bonds to long-term bonds, leading to a rise in demand for long-term bonds and a decrease in their yield.