Normal Yield Curve

Normal Yield Curve
A yield curve in which short-term debt instruments have a lower yield than long-term debt instruments of the same credit quality. This gives the yield curve an upward slope. This is the most often seen yield curve shape.

Sometimes referred to as "positive yield curve".

This yield curve is considered "normal" because the market usually expects more compensation for greater risk. Longer-term bonds are exposed to more risks such as changes in interest rates and an increased exposure to potential defaults. Also, investing money for a long period of time means an investor is unable to use the money in other ways, so the investor is compensated for this through the time value of money component of the yield.


Investment dictionary. . 2012.

Игры ⚽ Нужно сделать НИР?

Look at other dictionaries:

  • Normal Yield Curve —    A chart illustrating that yields on long term securities are at higher rates than the rates on short term securities, to reflect the extra risk of holding them for a longer period. Also known as a positive yield curve. The opposite of an… …   Financial and business terms

  • normal yield curve — A yield curve in which the yield rises in proportion to the length of time the security has to run until maturity …   Big dictionary of business and management

  • Yield curve — This article is about yield curves as used in finance. For the term s use in physics, see Yield curve (physics). Not to be confused with Yield curve spread – see Z spread. The US dollar yield curve as of February 9, 2005. The curve has a typical… …   Wikipedia

  • Yield Curve — A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity dates. The most frequently reported yield curve compares the three month, two year, five year and 30 year U.S. Treasury… …   Investment dictionary

  • yield curve — A chart in which the yield level is plot on the vertical axis and the term to maturity of debt instruments of similar creditworthiness is plotted n the horizontal axis. The yield curve is positive when long term rates are higher than short term… …   Financial and business terms

  • inverted yield curve — See yield curve slope. American Banker Glossary When short term interest rates are higher than long term rates. Antithesis of positive yield curve. Bloomberg Financial Dictionary * * *    A chart pattern that shows yields on short term securities …   Financial and business terms

  • playing the yield curve — An investment strategy designed to take advantage of differences in yield for different terms, for example by funding short term and investing longer term on a normal yield curve …   Big dictionary of business and management

  • Flat Yield Curve — A yield curve in which there is little difference between short term and long term rates for bonds of the same credit quality. This type of yield curve is often seen during transitions between normal and inverted curves. When short and long term… …   Investment dictionary

  • normal market — The deferred months prices for futures contracts are normally higher than the nearby months to reflect the costs of carrying a contract from now until the distant delivery date. Thus, a normal market, for non interest rate futures contracts,… …   Financial and business terms

  • Yield (engineering) — The yield strength or yield point of a material is defined in engineering and materials science as the stress at which a material begins to deform plastically. Prior to the yield point the material will deform elastically and will return to its… …   Wikipedia

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”