About the Site

This is my personal finance journal dedicated to investing, bank deals, money management, etc.  It is always best to start investing as soon as possible and by creating a website about it, it will help me stick to my goals while helping others along the way.  I am a recent college graduate in my mid 20s living in the northeast. 

 
Home arrow Articles arrow Investing arrow The Basics of the Yield Curve
The Basics of the Yield Curve PDF Print E-mail
Written by Administrator   
Sunday, 29 July 2007
Article Index
The Basics of the Yield Curve
Page 2
Page 3
Page 3 of 3
To a beginning investor, it always helps to expand your knowledge of financial terms and one that i've come across quite
frequently is "yield curve".

Often times, the term "Yield Curve" is mentioned in financial articles, and the phrase
"the yield curve is inverted so yadda-yadda-yadda" is thrown around back and forth.  

The simple definition of what the yield curve is is the relationship between short and long-term
interest rates (or yields) of US Treasuries (bills and bonds) .  When you graph the years to maturity vs. the yield (%), that is
what a yield curve is.  

Image

Just like CDs, normally the longer you loan out your hard earned dollars in treasuries,
the higher the return or interest rate should be when the treasuries mature.  However, when
the yield curve is inverted, it means short-term treasuries have a higher rate
of return than long-term treasuries.

What It Predicts
  • A normal looking yield curve is supposed to be a positive sign of the economy,
  • An inverted yield curve is supposed to be a prediction of a recession and that interest rates will be lowered.  The reason why an inverted yield curve is ominous is because a recession usually follows it most of the time, however not ALL the time.  
  • A flat curve in which all the treasuries have the same rate regardless of maturity date is a sign of uncertainty.  It could either become a normal yield curve or an inverted one.
  • A steep curve is when the long term treasuries yield 2% or more compared to the short term yields.  For example, on average, a 20 year treasury yields 2% more than a 3 month bill.  When the yield difference is greater than 2%, then it is a sign that the economy will do well.


Add as favourites (141) | Quote this article on your site | Views: 1010

Comments (21)
RSS comments
21. 24-02-2008 07:53
buy finasteride online
zetia medicine zetia medicine blog. amphetamine sale amphetamine sale blog. phenergan medication phenergan medication blog. dramamine patch site dramamine patch blog. tramadol hcl 50 site tramadol hcl 50 blog. drug information drug information blog. gabapentin weight gain gabapentin weight gain blog. avapro chest pressure avapro chest pressure blog. tussionex tussionex alcohol blog. cimetidine cats site cimetidine cats blog. zovirax addiction zovirax addiction blog. lipitor lipitor dangers blog. buy finasteride online buy finasteride online blog.
Written by This email address is being protected from spam bots, you need Javascript enabled to view it (Guest)

Write Comment
  • Please keep the topic of messages relevant to the subject of the article.
  • Personal verbal attacks will be deleted.
  • Please don't use comments to plug your web site. Such material will be removed.
  • Just ensure to *Refresh* your browser for a new security code to be displayed prior to clicking on the 'Send' button.
  • Keep in mind that the above process only applies if you simply entered the wrong security code.
Name:
E-mail
Homepage
Title:
BBCode:Web AddressEmail AddressBold TextItalic TextUnderlined TextQuoteCodeOpen ListList ItemClose List
Comment:



Code:* Code
I wish to be contacted by email regarding additional comments

Powered by AkoComment Tweaked Special Edition v.1.4


<< Prev - Next
Last Updated ( Sunday, 29 July 2007 )
 
Next >
[ Back ]