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Definition of 'Flat Yield Curve'
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.
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Investopedia explains '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%.
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Learn about required yield and take a closer look at how various yields are calculated.
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Find out what happens when short-term interest rates exceed long-term rates.
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By understanding the factors that influence interest rates, you can learn to anticipate their movement and profit from it.
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