Yield Curve
Definition
A graph showing yields on bonds of similar credit quality across different maturities. It illustrates how borrowing costs vary with the length of the loan.
The shape of the curve shows whether longer-term yields are above or below shorter-term ones. Economists watch how that shape changes as investors revise their expectations for future short-term rates and the compensation they want for holding longer-term debt.
Example
A two-year Treasury yields 3% and a ten-year Treasury yields 4%. The yield curve plots both rates against their maturities.
Canada
What does Canada’s yield curve show?
The curve plots government yields across maturities on the same date. If two-year bonds yield 3% and ten-year bonds yield 4%, that segment slopes upward by one percentage point. Changes in shape help explain why short-term and long-term borrowing rates can move differently.
Bank of Canada bond yields