Yield Curve

Short definition

The yield curve is yield by tenor for the same credit quality. The short end carries policy and liquidity; the long end inflation and growth expectations.

Detailed explanation

An inverted curve can mean tight short rates or a recession view; a steep curve inflation or a supply shock. Corporate credit is the Treasury curve plus a spread.

Refinancing is priced off the relevant point on the curve. Duration and the maturity wall sit on it.

Why it matters for the CFO

A long investment and long debt cannot be priced off the short policy rate. A curve shift moves WACC and NPV together.

How to read it

Parallel shifts are rare. If the short end falls and the long end rises, “rates fell” does not cheapen long refinancing.

Definitions are educational. They are not investment, credit or tax advice.