Normal Yield Curve

A normal yield curve is a graph that shows the relationship between interest rates and bond maturities, typically illustrating higher yields for longer-term investments. This shape reflects investors’ expectations that the economy will grow steadily, so they demand higher returns for locking in their money over time. It indicates healthy economic prospects and confidence that short-term rates are lower because of less risk. Essentially, it's a positive-sloped curve where longer-term loans cost more interest, aligning with the idea that taking on longer commitments involves greater uncertainty and time risk.