What are ‘Yield Curves’? Explain with examples.
A yield curve is a graph that shows the relationship between the yield, or interest rate, of a bond and its maturity date. Typically, the yield curve plots the yields of Treasury bonds, which are considered to be the safest and most reliable investments available. The shape of the yield curve can be a useful indicator of the market's expectations for future interest rates, economic growth, and inflation.
Yield curves are typically upward sloping, meaning that yields increase as the maturity of the bond increases. This reflects the fact that investors typically demand higher yields to compensate for the increased risk associated with holding longer-term bonds. However, yield curves can also be flat, meaning that yields are the same across all maturities, or inverted, meaning that yields on short-term bonds are higher than yields on long-term bonds.
One common way to compare different yield curves is to look at the difference, or _________ ______ _________ _______ ___ ______ ____.
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