Yield Curve
 |
Definition of 'Yield Curve'A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity dates. The most frequently reported yield curve compares the three-month, two-year, five-year and 30-year U.S. Treasury debt. This yield curve is used as a benchmark for other debt in the market, such as mortgage rates or bank lending rates. The curve is also used to predict changes in economic output and growth. |
 |
Investopedia explains 'Yield Curve'The shape of the yield curve is closely scrutinized because it helps to give an idea of future interest rate change and economic activity. There are three main types of yield curve shapes: normal, inverted and flat (or humped). A normal yield curve (pictured here) is one in which longer maturity bonds have a higher yield compared to shorter-term bonds due to the risks associated with time. An inverted yield curve is one in which the shorter-term yields are higher than the longer-term yields, which can be a sign of upcoming recession. A flat (or humped) yield curve is one in which the shorter- and longer-term yields are very close to each other, which is also a predictor of an economic transition. The slope of the yield curve is also seen as important: the greater the slope, the greater the gap between short- and long-term rates. |
 |
Related Video for 'Yield Curve'
|
Related Definitions
Articles Of Interest
-
Climb The Bond Ladder To Higher Income
Whether it's learning how to ladder bonds or finding alternatives, investors seeking better returns need to be more active. -
Yield Curve
Learn more about how this curve is used to predict changes in economic output and growth. -
Analyzing A Bank's Financial Statements
A careful review of a bank's financial statements can help you identify key factors in a potential investment. -
The Impact Of An Inverted Yield Curve
Find out what happens when short-term interest rates exceed long-term rates. -
Currency Carry Trades 101
This strategy can provide returns even if the currency pair doesn't move a cent. -
Bond Spreads: A Leading Indicator For Forex
Here we examine some telling patterns in the relation between countries' interest rates and their currency pairs. -
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. -
When Wholesale Funding Goes Bad
The wholesale funding process is extremely dependent on the credit markets. Therefore, it is not always the best option for a business. -
Bond Yield Curve Holds Predictive Powers
This measure can shed light on future economic activity, inflation levels and interest rates. -
Advanced Bond Concepts
Learn the complex concepts and calculations for trading bonds including bond pricing, yield, term structure of interest rates and duration.
Free Annual Reports