Bankrate's financial glossary
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A yield curve is a graph that shows the relationship between yields and maturity dates. Under normal circumstances, the longer it takes for a CD, bond or other investment to mature, the greater the yield, because people demand a greater return to tie up their money for a longer time. When the difference in rates between a short-term investment and a long-term one is reduced, the yield curve flattens. When economic forces cause a shorter maturity to produce a greater yield than a long maturity, the yield curve is said to be inverted.