The yield curve has steepened substantially over the past year, and it’s steeper now than it was just a month ago. Does it make sense, then, to tie your money up for the long term?

Unless you’re an interest-rate aficionado, you may be saying, “Huh?” So let’s back up.

The yield curve is a graph that shows short-term interest rates on the left and longer-term rates as you move to the right. It generally starts out low and curves upward, because long-term rates are usually higher. When the difference between short and long rates is large, the curve is steep, and when it’s small the curve is flat.

The curve gets steeper or flatter over time as investors change their consensus about whether inflation will be large or small.

Currently, for example, the yield curve on U.S. Treasury securities starts at about 0.14 percent, the annualized interest earnings on three-month Treasury bills, and rises to 4.35 percent for 30-year bonds, a difference of more than 4.2 percentage points. A year ago, the difference was around 2.6 percentage points.

It boils down to larger interest earnings for investors willing to tie their money up longer. That benefit is bigger today than it was a year ago.

If you had $1,000 to invest, you could earn $1.40 a year with three-month bills, and $43.50 a year in 30-year bonds. It’s a huge difference.

But there are risks to fixating on yields alone. Tying your money up for 30 years to earn more could cause you to miss out on better opportunities along the way. Interest rates might be higher on new bonds in a year or two, or you might decide the stock market looks like a better bet.

With the markets as volatile as they are, it pays to stay flexible even if you give up some interest earnings in the meantime. Even tying your money up for five or 10 years may be too long. You can get about 3.55 percent on a 10-year Treasury note, but that could be chewed to nothing if inflation picks up.

Five year certificates of deposit average around 2.2 percent, according to the BankingMyWay.com survey. That’s more than three times the 0.6 percent paid by three-month CDs. On a $1,000 investment, the earnings would be $22 versus $6.

But would you really want to tie $1,000 up for five years for an extra $16? That probably wouldn’t make sense given the opportunities you might miss in the meantime.

Despite the steepening of the yield curve, fixed-income investors are probably better off with holdings that mature in no more than a year or two, hunting for the best deals they can find.

Use the shopping tool to find CDs that beat the market averages. AIG Bank (Stock Quote: AIG), for example, has a 12-month CD yielding 2.31 percent, nearly double the 1.23 percent average. An 18-month CD at Citibank (Stock Quote: C) yields 2.25 percent.

And if you belong to a credit union, be sure to look into its offers, as many credit unions offer above-average yields. Also keep an eye out for special CDs that don’t have early withdrawal penalties or yields that rise with market conditions.

The Certificate of Deposit Calculator can figure your earnings with any combination of yield and maturity.

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