what is the term structure of interest rates 
the term structure of interest rates commonly known as the yield curve depicts the interest rates of similar quality bonds at different maturities investopedia julie bangunderstanding term structure of interest ratesessentially term structure of interest rates is the relationship between interest rates or bond yields and different terms or maturities when graphed the term structure of interest rates is known as a yield curve and it plays a crucial role in identifying the current state of an economy the term structure of interest rates reflects the expectations of market participants about future changes in interest rates and their assessment of monetary policy conditions in general terms yields increase in line with maturity giving rise to an upward sloping or normal yield curve the yield curve is primarily used to illustrate the term structure of interest rates for standard u s government issued securities this is important as it is a gauge of the debt market s feeling about risk one commonly used yield curve compares the three month two year five year 10 year and 30 year u s treasury debt yield curve rates are usually available at the treasury s interest rate website by 6 00 p m eastern standard time each trading day 1the term of the structure of interest rates has three primary shapes the u s treasury yield curvethe u s treasury yield curve is considered to be the benchmark for the credit market because it reports the yields of risk free fixed income investments across a range of maturities in the credit market banks and lenders use this benchmark as a gauge for determining lending and savings rates yields along the u s treasury yield curve are primarily influenced by the federal reserve s federal funds rate other yield curves can also be developed based upon a comparison of credit investments with similar risk characteristics most often the treasury yield curve is upward sloping one basic explanation for this phenomenon is that investors demand higher interest rates for longer term investments as compensation for investing their money in longer duration investments occasionally long term yields may fall below short term yields creating an inverted yield curve that is generally regarded as a harbinger of recession the outlook for the overall credit marketthe term structure of interest rates and the direction of the yield curve can be used to judge the overall credit market environment a flattening of the yield curve means longer term rates are falling in comparison to short term rates which could have implications for a recession when short term rates begin to exceed long term rates the yield curve is inverted and a recession is likely occurring or approaching 