Section 3, Yield Curves

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9 Terms

1
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Ascending / Normal / Positive Yield Curve
A curve where short-term yields are lower than long-term yields, indicating economic expansion.
2
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What does a Normal Yield Curve indicate about the economy?
Economic expansion.
3
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When the yield curve is normal, what must investors do to achieve higher interest income?
Take on additional credit risk or invest in longer-term maturities.
4
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Descending / Inverted / Negative Yield Curve
A curve where short-term yields are higher than long-term yields, indicating tight money and rising interest rates.
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What does an Inverted Yield Curve indicate about money and interest rates?
Periods of tight money and rising interest rates.
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What type of investments are safest during an Inverted Yield Curve?
Short-term money market investments.
7
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Flat Yield Curve
A curve where short-term yields are about the same as long-term yields, indicating economic uncertainty.
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What does a Flat Yield Curve indicate about the economy?
Economic uncertainty.
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What type of bond maturities should investors consider during a Flat Yield Curve?
Short and intermediate-term bond maturities. #