Rate curves record the variation between interest rates at two different terms. Common ones are the ten-year-rate-less-the-one-year-rate, or the five-year-rate-less-the-one-year-rate.

If longer terms rates are higher than short term rates, the rate curve is said to be 'positive' - that is the normal state of affairs.

But if short term rates are higher than longer term rates, that is relatively unusual, and the rate curve is said to be 'negative'. New Zealand rates in the period 2004 to 2008 displayed this unusual trend. A 'negative rate curve' is unsustainable in the long run, and is often an early indicator of a coming recession - but curiously, when it occurs at the time many observers say "but this time it's different". It never is.

Note that between July 2009 and July 2010, there was no one year NZ Government bond, hence that chart period is not available.