You will frequently hear about the “yield curve” in the financial press. A yield curve plots the yield-to-maturity for various terms of a financial instrument.
A yield curve is thus a graphical representation of yields at different terms.
You can create a yield curve for different terms of any debt instrument (the U.S. Treasury yield curve, the LIBOR-swap yield curve, etc.). The common theme is that a yield curve plots the interest rate yield for a certain type of financial instrument over different times to maturity.
If you’re wondering, “what is the yield?” it’s the return an investor would earn if they bought the security today and held it until its maturity date.
Note that the yield curve usually has an upward shape. This is because yields are usually higher for longer maturities. This is not always the case, however, and the yield curve can take on different shapes.
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