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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Yield curve

What does the yield curve tell a lender?

ONE OF 80 TERMS · FREE · NO SIGNUP

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

The yield curve plots the interest rates the market demands for lending over different periods, from overnight to many years. Its usual shape slopes upward, because lenders want more for lending longer; when short rates sit above long rates it has inverted, which the market reads as rates being expected to fall, often because growth is expected to slow. A lending desk reads the curve twice: as the base on which fixed-rate loans and swaps are priced, and as a signal about the conditions its floating-rate borrowers will meet when their debt reprices.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

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