Who this is for — Macro investors and analysts: the curve links short and long rates — 2s10s inversion is a classic recession indicator; steepening guides banks and value.
The yield curve maps yield vs maturity for government bonds (or swaps) — normal (upward sloping), flat or inverted (shorts > longs). It prices time and risk without credit.
In plain terms — «What government pays if you lend for 2 years vs 10» — curve shape tells growth expectations and Fed/ECB policy.
Key readings
| Shape | Typical meaning |
|---|---|
| Normal | Expected growth, moderate inflation |
| Inverted | Market anticipates slowdown / future cuts |
| Steepening | Recovery or inflation, bank margins ↑ |
| Flat | Uncertainty, regime transition |
2y–10y and 3m–10y spreads watched by Fed and media — inversion does not time the equity low.
Link to valuation
- Risk-free rate in DCF and WACC
- Equity multiples inversely correlated with long yields
- Duration sectors (growth, REIT) sensitive to curve shifts
- Credit spread = corporate curve − Treasury
Common mistake — Shorting equities only because curve inverted — lag months/years; premature positioning.
Example — 2022: inverted curve; 2023: steepening as inflation fell — rotation toward small caps and banks vs 2020–21 flattening growth-led.
Card
- Spreads: 2s10s, 3m10y.
- Macro: Rates and inflation.
- Assets: bonds, equity factors, FX.