Yield-curve shape in which intermediate maturities yield more than both short and long maturities.
A humped yield curve occurs when intermediate maturities yield more than both shorter and longer maturities. Instead of rising steadily or falling steadily, the curve peaks in the middle, often called the belly of the curve.
A humped curve shows that one maturity segment is priced differently from the wings of the curve. That can affect bond relative value, hedge design, and portfolio risk. A portfolio with the same average duration as another portfolio may behave differently if it is concentrated near the humped maturity zone.
| Use case | Practical question |
|---|---|
| Relative value | Is the belly cheap or rich compared with the wings? |
| Hedging | Does the hedge match the maturity point where the exposure is concentrated? |
| Liability matching | Are cash-flow needs concentrated in the humped maturity zone? |
| Risk reporting | Does key-rate duration reveal risk hidden by one average duration number? |
Assume a same-day benchmark curve reports:
| Maturity | Yield |
|---|---|
| 2 years | 4.10% |
| 5 years | 4.65% |
| 10 years | 4.25% |
The five-year point is 55 basis points above the two-year point and 40 basis points above the ten-year point, so the curve rises and then falls. That is a humped shape rather than a uniformly steep or inverted curve.
An analyst with a five-year liability should not assume the ten-year yield is an adequate hedge input merely because both are “longer-term” rates. Key-rate exposure around five years matters. The yields alone do not establish whether issuance, expectations, liquidity, or positioning caused the hump.
Use official or traceable curve data before relying on a humped-curve claim. For U.S. Treasury work, start with U.S. Treasury interest rate statistics and Federal Reserve H.15 selected interest rates. If the analysis uses model-implied term premia or forward rates, document the model source and assumptions separately from the observed yield curve.