Calculation and mechanics
For the US the Federal Reserve publishes daily the yields of Treasuries at constant maturity, interpolated from the prices of traded bonds. Plotting them against maturity produces the curve. Short maturities closely follow the policy rate, long ones also contain expectations of future rates and inflation plus a term premium.
The slope is usually quoted as the difference between two maturities in percentage points. Common are 10 years minus 2 years and 10 years minus 3 months. A negative value is called an inversion.
The Federal Reserve Bank of New York uses the spread 10 years minus 3 months in a model for the probability of a US recession in the following twelve months. According to the bank, every US recession since the late 1960s was preceded by an inversion of this spread, with a widely varying lead time.
Spread 10Y-2Y = yield 10 years - yield 2 years (in percentage points)
Distinction
The IV Term Structure shows the implied volatility of the options on one underlying across expiries, the yield curve yields of different bonds across maturities. Both are described by their slope, the mechanics behind them differ.
The VIX Futures Curve sits next to the yield curve in the Market Overview. One shows priced-in volatility across expiries, the other interest rate levels across maturities.
Sources
- Federal Reserve: H.15 Selected Interest Rates
- Federal Reserve Bank of New York: The Yield Curve as a Leading Indicator
Related terms
- VIX Futures Curve (VIX term structure, VX contracts)
- VIX (CBOE Volatility Index)
- IV Term Structure (Volatility Term Structure)
All market and analytical information is provided for educational and analytical purposes only and does not constitute investment advice or a trading recommendation.