Macro
Yield Curve
In normal times the yield curve slopes upward, because investors demand higher yields to lend for longer periods. The shape of the curve reflects the market's collective expectations for growth, inflation, and monetary policy.
A steepening curve often signals expectations of stronger growth or higher inflation, while a flattening curve suggests the opposite. Shifts in the curve influence everything from mortgage rates to bank profitability.
Because it distills so much information into one line, the yield curve is a favorite tool for reading where the economy may be headed. Its most famous signal appears when it inverts.
Example
When short-term yields sit below long-term yields, the yield curve has its normal upward slope, signaling a healthy expansion.
Yield Curve — FAQ
What is Yield Curve?
The yield curve is a graph plotting the interest rates of bonds of equal credit quality across different maturities, most often U.S. Treasuries from a few months to 30 years.
Can you give an example of Yield Curve?
When short-term yields sit below long-term yields, the yield curve has its normal upward slope, signaling a healthy expansion.
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