The yield curve is a visual representation of how interest rates of various bonds change at different maturities. The curve is a snapshot of how much bond investors can earn from interest at different maturity dates. If used correctly, a yield curve can show investors their potential returns and help inform their investment strategy. It can also foresight the state of the economy. In terms of the latter, the yield curve can mirror what direction the market thinks the Fed interest rates will move in. Yield curves can apply to various types of bonds such as U.S. treasuries, municipal bonds, or corporate bonds to name a few. In most contexts such as in news headlines, the yield curve is referring to U.S. treasury bonds. How A Yield Curve Works Although the nature of bonds vary depending on what type of bond you invest in, the fundamentals are the same. You lend money to a government entity or corporation for a set period of time – 20 or 30 years, for example. The organization you lend the money to pays you coupons or recurring fixed interest