A normal yield curve slopes upward — longer-dated bonds yield more because investors demand a premium for locking up capital over time and for the risk that inflation eats their real return. A flat curve suggests uncertainty; an inverted curve, where short-term rates exceed long-term rates, has preceded almost every US recession in the last 60 years and is therefore one of the most-watched indicators in finance.
Yield-curve shape responds to two forces: the central bank, which sets the short end via the policy rate, and market expectations of future inflation and growth, which set the long end through bond supply and demand. When the SNB or ECB hikes aggressively while inflation expectations are anchored, the curve flattens or inverts — exactly what happened in 2022–2023.
Retail investors meet the yield curve when choosing between a 3-year and a 10-year fixed-rate mortgage, or between short- and long-dated bond funds. In a steep curve, locking in long fixed mortgage rates can be expensive; in a flat or inverted curve, there is little extra cost to lock in long fixations and protect against rate shocks.
In late 2023 the Swiss yield curve is inverted: 2-year Confederation bonds yield 1.45% while 10-year bonds yield 1.05%. A homeowner choosing between a 2-year fix at 2.1% and a 10-year fix at 2.0% takes the 10-year because it is both cheaper today and provides decade-long protection against re-fix risk.