Yield Curve, Does It Matter?

A yield curve is a graph that shows the interest rates investors earn on federal bond commitments with different lengths of time until they are repaid, but with identical credit quality.

Normally, longer-term bonds pay higher interest rates than short-term bonds because investors take on risk by lending their money for a longer period of time. This creates an upward sloping, normal, yield curve. This is what we like.

Sometimes the yield curve becomes inverted or negative, meaning shorter term bonds pay higher interest rates than longer-term bonds. This typically happens when there are expectations for slower economic growth. An inverted yield curve has generally been an early warning sign of a recession.

Should you be alarmed?

https://www.ustreasuryyieldcurve.com

Hard to say. Interest rates tell you quite a lot. They tell you how the international community feels about purchasing American debt. Interest rates consider the opinions of all those who are willing to assume a debt instrument with the expectation of being repaid.

-Zac