Flat Yield Curve

Loading the player...

What is the 'Flat Yield Curve'

The flat yield curve is a yield curve in which there is little difference between short-term and long-term rates for bonds of the same credit quality. This type of yield curve is often seen during transitions between normal and inverted curves.

Flat Yield Curve

BREAKING DOWN 'Flat Yield Curve'

When short- and long-term bonds are offering equivalent yields, there is usually little benefit in holding the longer-term instruments - that is, the investor does not gain any excess compensation for the risks associated with holding longer-term securities. For example, a flat yield curve on U.S. Treasury would be one in which the yield on a two-year bond is 5% and the yield on a 30-year bond is 5.1%.

RELATED TERMS
  1. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments ...
  2. Matrix Trading

    A fixed-income trading strategy that looks for discrepancies ...
  3. Spot Rate Treasury Curve

    A yield curve constructed using Treasury spot rates rather than ...
  4. Curve Steepener Trade

    A strategy that uses derivatives to benefit from escalating yield ...
  5. Par Yield Curve

    A graph of the yields on hypothetical Treasury securities with ...
  6. Bull Steepener

    A change in the yield curve caused by short-term rates falling ...
Related Articles
  1. Bonds & Fixed Income

    The Impact Of An Inverted Yield Curve

    Find out what happens when short-term interest rates exceed long-term rates.
  2. Investing News

    U.S. Recession Without a Yield Curve Warning?

    The inverted yield curve has correctly predicted past recessions in the U.S. economy. However, that prediction model may fail in the current scenario.
  3. Bonds & Fixed Income

    Advanced Bond Concepts: Term Structure of Interest Rates

    The term structure of interest rates, also known as the yield curve, is a very common bond valuation method. Constructed by graphing the yield to maturities and the respective maturity dates ...
  4. Bonds & Fixed Income

    Bond Yield Curve Holds Predictive Powers

    This measure can shed light on future economic activity, inflation levels and interest rates.
  5. Investing Basics

    Interest Rates And Your Bond Investments

    By understanding the factors that influence interest rates, you can learn to anticipate their movement and profit from it.
  6. Stock Analysis

    How Healthy Is The Economy, Really? This May Be The Only Way To Tell

    For many market strategists, the Federal Reserve's multi-trillion-dollar stimulus program has had one huge drawback.The Fed's massive quantitative easing (QE) programs have rendered what's known ...
  7. Bonds & Fixed Income

    Understanding Interest Rates, Inflation And Bonds

    Get to know the relationships that determine a bond's price and its payout.
  8. Term

    Understanding Interest Rates Inflation And The Bond Market

    Interest rates, bond yields and inflation expectations are all correlated.
  9. Bonds & Fixed Income

    3 Risks U.S. Bonds Face in 2016

    Learn about the major risks for the bond market in 2016; interest rate increases, high-yield bond volatility and a flatter yield curve may be issues.
  10. Investing

    Understanding the Different Types of Bond Yields

    Any investor, private or institutional, should be aware of the diverse types and calculations of bond yields before an actual investment.
RELATED FAQS
  1. How can the yield curve help me make investment decisions?

    Learn about the yield curve, and discover why this chart is an important economic indicator. How do Treasury bond yields ... Read Answer >>
  2. What is the difference between term structure and a yield curve?

    Understand the difference between the term structure of interest rates and a yield curve, if any. Learn what the yield curve ... Read Answer >>
  3. Below is an example of US Treasury yields for various maturities ...

    The correct answer is b. A normal yield curve chart shows long-term debt instruments having higher yields than short-term ... Read Answer >>
  4. Where on the Internet can I find yield curves over various periods?

    Find out where to locate reliable yield curve information on the Internet, including the U.S. Department of the Treasury ... Read Answer >>
  5. What is the difference between the Daily Treasury Long-Term Rates and the Daily Treasury ...

    Find out more about the daily Treasury long-term rates, daily Treasury yield curve rates and the difference between these ... Read Answer >>
  6. What does market segmentation theory assume about interest rates?

    Learn about how the market segmentation theory for different maturities of interest rates seeks to describe the shape of ... Read Answer >>
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center