Yield Curve

A yield curve is a graphical representation of the interest rate levels on loans issued by a state according to different loan durations (3 months, 6 months, 1 year, 2 years, 5 years, 10 years, 30 years...).

A yield curve is a snapshot at a given moment of the relationship between the level of interest rates and the maturity of the loans. This yield curve is most often upward sloping, meaning that the level of rates gradually increases with the duration over which the state borrows.

However, the curve can invert during certain financial crises. It is customary to compare a yield curve established at different dates, which allows measuring the changes that occurred during the intervening periods in the level of rates at different maturities. This curve may have shifted upwards (general rise in rates) or downwards (general fall in rates) or may have "deformed" if the changes that occurred are not identical for short, medium, and long-term loans.

It is also common to compare a country's yield curve with those of other countries. Thus, within the eurozone, it is customary to compare the German yield curve with those of other countries in the zone.