The yield curve represents borrower’s bond yields across different maturities. The curve is thus plotted with yields on the y-axis and time to maturity on the x-axis. The yield curve is normally positively sloped (long term yields higher than short term yields). In rare cases, the curve can be negatively sloped (inverted curve), which is often considered a sign of recession.
There is a wide range of yield curve movements; however three main types of movements explain changes in yield curve: the parallel shift, the twist (change in slope) and the butterfly (change in curvature).
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