The yield curve plots bond yields (interest rates) against their maturities, typically from 3 months to 30 years.
Shapes
- Normal (upward sloping): long-term rates > short-term rates → healthy economy
- Flat: similar rates across maturities → uncertainty
- Inverted: short-term rates > long-term rates → recession warning
Asian Yield Curves
- Japan: Extremely flat due to BOJ yield curve control (YCC) policy
- China: Generally normal, PBOC manages the shape
- India: Usually steep (high long-term rates)
Japan's Yield Curve Control
From 2016-2023, the BOJ explicitly targeted a 0% yield on 10-year Japanese government bonds — directly controlling the yield curve shape. This was unique globally and had massive implications for yen and Japanese asset markets.
Why Investors Watch
The US Treasury yield curve affects all Asian markets. An inverted US curve tends to precede global slowdowns, hitting export-dependent Asian economies hard.