The Yield Curve is represented as a line plotted across yields from different bonds of the same credit rating with different maturity dates. This forms three modes for the Yield Curve; normal, where bonds with longer maturity dates have higher yields than bonds with shorter maturity rates; inverted, where short term bond yields are higher than long term bond yields; and flat, where short term bond yields are roughly the same as long term bond yields. Finesse measures the slope of this curve by subtracting the short-term bond yield (1yr or less) from the 10-year bond yield rate. Long term rates are generally higher to compensate lenders for future risk including inflation. Central banks raise short term rates to slow inflation and cool the economy. If short term rates exceed long term rates, the Yield Curve inverts (turns negative) which often precedes a recession and a stock market drop.
