Inverted Spread

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Dictionary Says

Definition of 'Inverted Spread'

A situation in which the yield difference between a longer term financial instrument and a shorter term instrument is negative. This is calculated by subtracting the longer term by the shorter term. In effect, the shorter term instrument is yielding a higher rate of return than the longer term instrument. This is in contrast to what is considered a normal market, where longer term instruments should yield higher returns to compensate for time.
Investopedia Says

Investopedia explains 'Inverted Spread'

For example, in the bond market, if you had a three-year government bond yielding 5% and a 30-year government bond yielding 3%, the spread between the two yields would be inverted by 2% (3% - 5% = -2%). The reasons behind this situation can vary and can include such things as changes in demand and supply of each instrument and the general economic conditions at the time.

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'Inverted Spread'

  • The Impact Of An Inverted Yield Curve

    http://www.investopedia.com/articles/basics/06/invertedyieldcurve.asp
    ... An inverted curve eliminates the risk premium for long-term investments, allowing
    investors to get better returns with short-term investments. When the spread ...

  • Advanced Bond Concepts: Term Structure of Interest Rates ...

    http://www.investopedia.com/university/advancedbond/advancedbond4.asp
    ... Some investors, however, interpret an inverted curve as an indication that the ... The
    Credit Spread The credit spread, or quality spread, is the additional yield ...

  • Series 65 Study Guide - Cash Equivalents and Fixed Income ...

    http://www.investopedia.com/exam-guide/series-65/cash-equivalents-fixed/yield-curves.asp
    ... below. Figure 9.2: Inverted Yield Curve. ... risk. However, the spread is not constant -
    it can fluctuate over time , based on factors such as: ...

  • When Wholesale Funding Goes Bad

    http://www.investopedia.com/articles/economics/09/when-wholesale-funding-goes-bad.asp
    ... To achieve a positive spread, it is first necessary to have an upward sloping yield
    curve. An inverted yield curve, or one in which short-term rates are higher ...

  • Are Financials Finally Ready To Soar?

    http://stocks.investopedia.com/stock-analysis/2010/Are-Financials-Finally-Ready-To-Soar-BAC-WFC-ONB-METR1222.aspx
    ... The Bottom Line The widening spread between short term and long term rates is a
    benefit for ... For related reading, check out The Impact Of An Inverted Yield Curve ...

  • Analyzing A Bank's Financial Statements

    http://www.investopedia.com/articles/stocks/07/bankfinancials.asp
    ... The size of this spread is a major determinant of the profit generated by a bank. ...
    (For more insight, see The Impact Of An Inverted Yield Curve and Trying To ...

  • Conference Board: Composite Index Of Leading Indicators ...

    http://www.investopedia.com/university/conferenceboard/conferenceboard2.asp
    ... Federal Funds target) - The interest rate spread is often referred to as the yield ...
    This is particularly true when the curve becomes inverted, that is, when the ...

  • CFA Level 1 Study Guide - Fixed Income Investments - Yield Curves ...

    http://www.investopedia.com/exam-guide/cfa-level-1/fixed-income-investments/yield-curves.asp
    ... International Finance; 5.8 Purchasing Power Parity and Interest Rate Parity;
    5.9 Foreign Exchange; 5.10 Spread Calculations; 5.11 Spot ...

  • Series 7 Study Guide - Portfolio Management - Technical Analysis ...

    http://www.investopedia.com/exam-guide/series-7/portfolio-management/technical-analysis.asp
    ... shoulder in March 2002. Technicians consider this a bearish chart. An inverted
    head-and-shoulders would be bullish. Take a closer look ...

  • CFA Level 1 Study Guide - Fixed Income Investments - The Term ...

    http://www.investopedia.com/exam-guide/cfa-level-1/fixed-income-investments/interest-rate-term-structure.asp
    ... International Finance; 5.8 Purchasing Power Parity and Interest Rate Parity;
    5.9 Foreign Exchange; 5.10 Spread Calculations; 5.11 Spot ...

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