Yield curve is a graphical representation of interest rates or yields on bonds offered on different maturity dates. Yield curves are important tools used to determine the yield on bonds that have the same credit quality but different maturities. A yield curve has interest rates on the x-axis and the maturities on the y-axis.
A yield curve can take different shapes depending on the economic cycle. It helps analyse the difference between the short-term and long term-bonds by displaying the yield offered on both. They are usually upward sloping because an investor who is willing to invest in a long-term bond must be compensated with higher yield.
