Glossary term
Yield Curve
The relationship between interest rate and maturity, typically plotted for US Treasuries from 3-month to 30-year. A normal curve slopes upward; a flat curve signals late-cycle; an inverted curve (short rates above long) has preceded every US recession since 1970 at roughly 12-18 months' lag. The yield-curve slope is one of eight Money Temperature instruments.
Definition & Context
The yield curve is a snapshot of interest rates across maturities. The US Treasury curve spans 4-week bills to 30-year bonds and is the single most watched macro indicator. Three shapes matter: normal (upward slope, long rates above short rates, reflecting term premium and growth expectations), flat (parallel levels, indicating late-cycle slowing), and inverted (short rates above long, implying the market expects rate cuts as growth slows).
Inversion matters because it has a near-perfect track record of preceding US recessions. The 2s/10s (two-year vs ten-year) spread inverted before every US recession since 1970 at a 12–18 month lead; the 3m/10y inversion is used by the NY Fed’s formal recession-probability model. The 2022–2024 inversion was the deepest and longest since the early 1980s, and the recession it signalled partially materialised as 2025’s growth slowdown.
Why It Matters for Investors
Closelook’s Money Temperature uses the 2s/10s spread as one of eight macro instruments. Inversion depth feeds directly into the stress-regime score; a steepening curve off an inversion (the classic bull steepener as short rates fall faster than long rates) is often the lowest-risk equity entry of a cycle. The Weekly Signal also uses the yield-curve slope as a regime overlay on the Rubin portfolio: sustained inversion caps capex-cycle exposure.
Related Concepts
Yield-Curve shape is the dominant macro input to Money Temperature and Market Regime classification; it interacts with DXY to determine the stress-regime composite.