DEFINITION of 'Term Structure Of Interest Rates'
The relationship between interest rates or bond yields and different terms or maturities. The term structure of interest rates is also known as a yield curve and it plays a central role in an economy. The term structure reflects expectations of market participants about future changes in interest rates and their assessment of monetary policy conditions.
INVESTOPEDIA EXPLAINS 'Term Structure Of Interest Rates'
In general terms, yields increase in line with maturity, giving rise to an upward sloping yield curve or a "normal yield curve." One basic explanation for this phenomenon is that lenders demand higher interest rates for longerterm loans as compensation for the greater risk associated with them, in comparison to shortterm loans. Occasionally, longterm yields may fall below shortterm yields, creating an "inverted yield curve" that is generally regarded as a harbinger of recession.

Coupon
The interest rate stated on a bond when it's issued. The coupon ... 
Spot Rate
The price that is quoted for immediate settlement on a commodity, ... 
Yield Curve
A line that plots the interest rates, at a set point in time, ... 
Discounted Cash Flow  DCF
A valuation method used to estimate the attractiveness of an ... 
OnTheRun Treasury Yield Curve
The U.S. Treasury yield curve derived using ontherun treasuries. ... 
Interpolated Yield Curve  I Curve
A yield curve derived by using ontherun treasuries. Because ...

How can I create a yield curve in Excel?
You can create a yield curve in Microsoft Excel if you are given the time to maturities of bonds and their respective yields ... Read Full Answer >> 
What are the different formations of yield curves?
There are three main different formations of yield curves: normal, inverted and flat yield curves. The yield curve describes ... Read Full Answer >> 
What is the difference between the rule of 70 and the rule of 72?
The rule of 70 and the rule of 72 give rough estimates of the number of years it would take for a certain variable to double. ... Read Full Answer >> 
On what basis does the sustainable growth rate fluctuate?
The main difference between a bond’s yield to maturity, or YTM, and the spot rate is that the YTM uses the same interest ... Read Full Answer >> 
What are some classes I can take to prepare for the Series 6 exam?
The riskreturn tradeoff for bonds is the increased yield investors can obtain from corporate and other types of bonds that ... Read Full Answer >> 
What level of return on equity is average for companies in the chemicals sector?
The modified duration is an adjusted version of the Macaulay duration and takes into account how interest rate fluctuations ... Read Full Answer >>

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