In finance, the relationship between short-term rates and long-term rates is known as the term structure of INTEREST RATES. A yield curve is a picture of the term structure of interest rates. For securities, on a graph where the horizontal axis represents years to maturity and the vertical axis represents interest rates, a yield curve illustrates the relationship between yields and maturities. Short-term securities (money-market instruments, for example) are represented on the horizontal between zero and one years to maturity, and longer-term securities (capital market instruments) are represented on the horizontal axis beyond the one-year point. Most yield curves are upward-sloping and are known as normal yield curves. They have positive slopes because, historically, short-term rates have been lower than longterm rates. The longer a security�s term to maturity, the higher its yield. Thus, when plotted, the yield curve, consisting of yields of all securities from short-term to longterm ones, must be upward-sloping. During periods of high INFLATION, which in turn causes higher interest rates, especially for short-term securities, yield curves can have negative slopes. Such yield curves are known as inverted yield curves. Because investors expect the high rates of inflation to subside in the future, they expect long-term rates to be lower than current short-term rates. When plotted, these yield curves will have negative slopes. For example, in early 1980, when inflation had risen to double-digit levels, yield curves plotted at that point in time were inverted yield curves. Since that time, inflation has been better controlled and has subsided to single-digit levels, and yield curves have been normal ones.