Yield Curve
The yield curve is a graphical representation of the relationship between the yields on bonds of different maturities. It is used to compare the yields of bonds with different maturities, such as short-term, medium-term, and long-term bonds. The yield curve is typically upward sloping, meaning that longer-term bonds have higher yields than shorter-term bonds. This is because investors typically demand higher yields for longer-term investments, as they are taking on more risk. The yield curve can also be downward sloping, which is known as an inverted yield curve. This is usually an indication of an economic recession.
History of the Yield Curve
The yield curve has been used since the late 19th century, when it was first developed by the British economist Alfred Marshall. Marshall used the yield curve to compare the yields of different bonds and to analyze the relationship between the yields of different maturities. Since then, the yield curve has become an important tool for investors and economists to analyze the state of the economy.
Comparison of Yields
| Maturity | Yield |
|---|---|
| 1 Month | 2.5% |
| 3 Month | 2.7% |
| 6 Month | 2.9% |
| 1 Year | 3.1% |
| 2 Year | 3.3% |
| 5 Year | 3.7% |
| 10 Year | 4.2% |
Summary
The yield curve is a graphical representation of the relationship between the yields on bonds of different maturities. It is used to compare the yields of bonds with different maturities, such as short-term, medium-term, and long-term bonds. The yield curve is typically upward sloping, meaning that longer-term bonds have higher yields than shorter-term bonds. This is because investors typically demand higher yields for longer-term investments. For more information on the yield curve, you can visit websites such as Investopedia, Bloomberg, and the Federal Reserve Bank of St. Louis.
See Also
- Interest Rate
- Bond Yield
- Inflation
- Credit Risk
- Duration
- Maturity
- Treasury Yield
- Yield Spread
- Yield to Maturity
- Zero Coupon Bond
