What Is A Yield Curve

This lesson is about yield curves, which is a tool used by stock and bond investors to analyze the current market conditions and predict its future behavior. A yield curve is a graph that shows the relationship between the yield of a bond and its term. It starts with the yield on the y-axis and the term on the x-axis, and it plots the yield of bonds with different terms. There are three types of yield curves: positive, flat, and inverse. A positive yield curve starts with a low yield for the short term and increases as the term extends, while a flat yield curve shows a relatively constant yield regardless of the term. An inverse yield curve, on the other hand, starts with a high yield for the short term and decreases as the term extends. The yield curve is an important tool as it can help investors understand the current market conditions and the intentions of the federal government to steer the economy.
In this lesson, the focus is on explaining what yield curves are and how they can be used to predict market behavior. The screen showed a US Treasury yield curve on 11 May 2012 as an example, which showed the short-term interest rates being low due to the efforts of the federal government to stimulate the economy. This serves as an illustration of how yield curves can help investors understand the current market conditions and how they are being influenced by the government’s monetary policies.