Investopedia

Continue to Site »

Inverted Spread

Filed Under » ,
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.

Articles Of Interest

  1.

    Advanced Bond Concepts

    Learn the complex concepts and calculations for trading bonds including bond pricing, yield, term structure of interest rates and duration.

  2. Futures Fundamentals

    For those who are new to futures but want a solid understanding of them, this tutorial explains what futures contracts are, how they work and why investors use them.

  3. Uncovering Oil And Gas Futures

    Find out how to stay on top of data reports that could cause volatility in oil and gas markets.

  4. Why Your Pension Plan Has Sovereign Debt In It

    One type of security pensions tend to invest in is sovereign debt, or debt issued by a government.

  5. Trading Is Timing

    Learn how to make gains even if you don't get in at the right time.

  6. Leading Economic Indicators Predict Market Trends

    Leading indicators help investors to predict and react to where the market is headed.

  7. Exploring Non-Dollar Currencies For Forex Trading

    Learn how investments in foreign currencies can diversify your portfolio.

  8. Candlestick Charting: What Is It?

    Discover the components and basic patterns of this ancient technical analysis technique.

  9. 6 Popular ETF Types For Your Portfolio

    Exchange traded funds are an extremely popular diversification tool that can protect your portfolio during troubled periods.

  10. Financial Solutions For Young Women

    Break through the stereotypes and find out how to manage your life to meet your needs.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.

  2. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.

  3. Icarus Factor

    The term Icarus factor describes a situation where managers or executives initiate an overly ambitious project which then fails. Fueled by excitement for the project, the executives are unable to reign in their misguided enthusiasm before it is too late to avoid the failure.

  4. Angelina Jolie Stock Index

    An index made up of a selection of stocks from companies associated with actress Angela Jolie.

  5. Consequential Loss

    The amount of loss incurred as a result of being unable to use business property or equipment.

  6. Lease To Own

    An arrangement where an individual enters into a lease agreement with an owner with the inclusion of a clause that typically gives the individual the right, but not the obligation, to purchase the item leased at a predefined price and time.
Trading Center