Negative yield curve

A negative, or inverted, yield curve results when the interest rate on short-term US Treasury issues is higher than the rate on on long-term Treasury bonds.

You create the curve by plotting a graph with rate on the vertical axis and maturity date on the horizontal axis and connecting the dots. When the curve is negative the highest point is to the left.

A positive yield curve - one that's higher on the right - results when the yield on long-term bonds is higher than the yield on the short-term bills. A level curve results when the rates are essentially the same.

In most periods, the yield curve is positive because investors demand more for tying up their money for a longer period. But there are times, such as when interest rates seem to be on the upswing, that the pattern is reversed and the yield curve is negative.