Yield Elbow

Imagine you’re taking a nice hike up a steep hill. The hills are alive with the sound of music.

Now imagine it’s a graph. The top of the hill is the “elbow” of the graph. The higher the line of the graph, the higher the yield. The x-axis is time.

This is the yield elbow: the point on the yield curve that’s the time at which the economy experienced the highest interest rates. It’s the highest point of the curve, before things went downhill (literally). Usually, at the top of the curve is when people start worrying about current or future inflation, and usually bond prices are low.

Yield curves are used by investors and analysts to find opportunities for realizing high rates of returns on their investments. Cha-ching.