Government Bond Yield Curve is a curve representing a relationship between yield and the remaining time to maturity of government debt securities; whereby

Yield means a return received from a security, usually presented annually as a percentage. For example, yield of a five-year government bond equaling 2.39 percent per year means the bond holders will receive an average rate of return 2.39 percent per year.

Time to Maturity means the length of time remaining until the maturity, counting from present date to maturity date.  For example, the time to maturity of the ten-year National Savings Bonds issued on 2 September 2002 is 3 years and 8 months, as of 2 January 2009.

The picture below shows a domestic yield curve of Thai government debt securities as of 8 January 2009 established by the Thai bond Market Association (ThaiBMA).

From the picture, investors can use the yield curve as a benchmark for decision making. For example, on 8 January 2009, the yields of five-year and ten-year government debt securities should be equal to 2.39 percent and 2.98 percent, respectively.

Besides providing reasonable yields for different time to maturity, the government bond yield curve is accepted as a risk free rate benchmark. The yield of the riskier securities should be added by risk premium spread. Furthermore, it is also used to calculate for mark to market value of debt securities.