negative yield curve

A yield curve characterized by interest rates that are higher on short-term debt than on long-term debt. This is an abnormal circumstance, because typically investors want to be compensated for taking on the greater risk of tying their funds up for a longer period of time. A negative yield curve has a downward slope. This contrasts with a positive yield curve, which is characterized by higher long-term interest rates and lower short-term interest rates. Also called inverted yield curve.