Macro & Bonds
Yield Curve
A graph of interest rates (yields) on bonds of equal credit quality but different maturities (1-month to 30-year). A normal curve slopes upward; an inverted curve historically signals recession.
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Economic Calendar →Related Terms
Inverted Yield Curve
When short-term yields exceed long-term yields. Historically, inversions of the 2-year and 10-year Treasury spread have preceded every US recession since the 1970s.
Basis Points (bps)
A unit equal to 1/100th of a percentage point. Used to describe small changes in interest rates or yields. 25 bps = 0.25%; 100 bps = 1%.
Federal Funds Rate
The interest rate at which US banks lend reserve balances to each other overnight. Set by the Federal Reserve's FOMC. Changes ripple through all other interest rates in the economy.
CPI (Consumer Price Index)
A measure of the average change over time in prices paid by consumers for a basket of goods and services. The primary inflation gauge watched by the Federal Reserve.
Duration
A measure of a bond's sensitivity to interest rate changes. A duration of 5 means the bond's price falls ~5% for every 1% rise in yields. Longer-dated bonds have higher duration.
Spread (Bonds)
The yield difference between two bonds, usually vs. a Treasury benchmark. Credit spreads widen when investors demand more compensation for default risk — a sign of market stress.