Answer question on yield curve

There was a broad question on yield curve, I will try to explain at a high level. If you have any specific questions I am more than happy to take a look.

By definition, yield curve is the relationship between maturity and yield of bonds with equal quality but different maturities. In practice, money managers closely monitor yield curve changes in order to determine investment strategy. To analyse, a benchmark is normally used such as the U.S. Treasury bond yield.

Three types of yield curves exist that describe the shape of yield curve – normal, inverted and flat. In a normal yield curve, securities with long maturity have higher yields than securities with short maturity. This is intuitive, any investor would demand for a higher yield if their investments were to be held for a longer time period. In this case, an income portfolio may invest in long duration bonds to secure the income generated by a higher yield. 

In an inversed yield curve, long maturity bonds produce a lower yield. This may be an indication of recession, economic slow down where investors are not willing to invest for the long term and prefer the liquidity and safety in an investment. Here's a graphic illustration of each type of yield curve, and how their impact on interest rate spreads.

     Source: http://www.drfurfero.com/books/mandf/ch13.html