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Definition of 'Yield Curve Risk'
The risk of experiencing an adverse shift in market interest rates associated with investing in a fixed income instrument. The risk is associated with either a flattening or steepening of the yield curve, which is a result of changing yields among comparable bonds with different maturities.
When market yields change, this will impact the price of a fixed-income instrument. When market interest rates, or yields, increase, the price of a bond will decrease and vice versa.
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Investopedia explains 'Yield Curve Risk'
When the yield curve shifts, the price of the bond, which was initially priced based on the initial yield curve, will change in price. If the yield curve flattens, then the yield spread between long- and short-term interest rates narrows, and the price of the bond will change accordingly. If the bond is a short-term bond maturing in three years and the three-year yield decreases, the price of this bond will increase.
If the yield curve steepens, this means that the spread between long- and short-term interest rates increases. Therefore, long-term bond prices will decrease relative to short-term bonds. Changes in the yield curve are based on bond risk premiums and expectations of future interest rates.
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Search results for 'Yield Curve Risk'
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http://www.investopedia.com/exam-guide/cfa-level-1/fixed-income-investments/yield-curve-risk.asp
Learn how yield curve risk can affect your bond portfolio and how the various
shifts in the yield curve relate to interest-rate risk. ...
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http://www.investopedia.com/exam-guide/cfa-level-1/fixed-income-investments/traditional-yield-curve-measures-assumptions.asp
... Call and Prepayment Risk; 14.11 Reinvestment Risk; 14.12 Yield Curve Risk;
14.13 Credit Risk; 14.14 Liquidity Risk; 14.15 Exchange-Rate ...
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http://www.investopedia.com/articles/basics/06/invertedyieldcurve.asp
... (For further reading, see Corporate Bonds: An Introduction To Credit Risk.) Despite
their consequences for some parties, yield curve inversions tend to have ...
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http://www.investopedia.com/exam-guide/cfa-level-1/fixed-income-investments/yield-curves.asp
... Call and Prepayment Risk; 14.11 Reinvestment Risk; 14.12 Yield Curve Risk;
14.13 Credit Risk; 14.14 Liquidity Risk; 14.15 Exchange-Rate ...
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http://www.investopedia.com/exam-guide/series-65/cash-equivalents-fixed/yield-curves.asp
... where interest rates are at the time of the yield curve. ... corporate bonds always have
a higher yield than government bonds due to their higher risk. ...
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http://www.investopedia.com/articles/03/110503.asp
... at each point of maturity (for a review of the yield curve, see this ... credit spread
reflects the extra compensation investors receive for bearing credit risk. ...
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http://www.investopedia.com/exam-guide/cfa-level-1/fixed-income-investments/reinvestment-risk.asp
... Call and Prepayment Risk; 14.11 Reinvestment Risk; 14.12 Yield Curve Risk;
14.13 Credit Risk; 14.14 Liquidity Risk; 14.15 Exchange-Rate ...
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http://www.investopedia.com/exam-guide/cfa-level-1/macroeconomics/phillips-curve.asp
... Call and Prepayment Risk; 14.11 Reinvestment Risk; 14.12 Yield Curve Risk;
14.13 Credit Risk; 14.14 Liquidity Risk; 14.15 Exchange-Rate ...
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http://www.investopedia.com/university/advancedbond/advancedbond4.asp
... fixed-income investments when there is an inverted yield curve, which indicates
that investors expect to receive less compensation for taking on more risk. ...
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http://www.investopedia.com/articles/optioninvestor/08/manage-interest-rate-risk.asp
... see evidence of the pitfalls of ignoring the daunting threat of interest rate risk. ...
was great - short-term rates fell and the normal yield curve was maintained ...
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