The Yield Curve is a chart that plots bond interest rates over different maturities. Interest rates are reported on the vertical (y) axis, while the bond maturity dates are on the horizontal (x) axis.
There are generally three types of yield curves: normal, inverted, and flat. A normal yield curve shows lower yields for shorter maturities. As the maturities start to increase, the yields increase, which causes the curve to slope upward from left to right.
An inverted yield curve slopes downward from left to right. The curve shows that as maturities start to increase, the yields decrease.
A flat yield curve has a horizontal slope. This curve shows that bonds of all maturities have little to no rate differences. A flat yield curve is often a sign of a looming recession.