what a healthy yield curve looks like
a healthy or normal yield curve gently slopes upward from left to right this indicates stable economic conditions and that the market expects the economy to grow steadily image by julie bang investopedia 2019a normal yield curve shows yields rising for bonds with longer maturities sample yields on the curve may include a two year bond that offers a yield of 1 a five year bond that provides a yield of 1 8 a 10 year bond that offers a yield of 2 5 a 15 year bond that provides a yield of 3 0 and a 20 year bond that offers a yield of 3 5 if the curve steepens this implies strong economic growth leading to higher inflation and higher interest rates if it flattens this suggests uncertainty and reflects caution the barbell strategythe barbell strategy could benefit investors in a flattening yield curve environment or if the federal reserve is looking to raise the federal funds rate 7 however this strategy could underperform should the yield curve grow steeper in a barbell strategy half of a portfolio has long term bonds while the rest has short term bonds for example assume the yield spread is 8 and investors believe the yield curve will flatten investors could allocate half their fixed income portfolio to u s treasury 10 year notes and the other half to u s treasury two year notes this way investors have some flexibility and can react to changes in the bond markets however portfolios like this could fall significantly if there s a meteoric increase in long term rates 