Difference between revisions of "Yield curve"
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Revision as of 22:25, December 14, 2009
The yield curve is a curve that plots interest rates over different maturity times for bonds having otherwise equivalent characteristics.[1] Equivalently for commodities, a curve that plots the forward prices (that is, prices for commodities with differing future delivery dates) is called a forward curve. A commodities forward curve that is upward sloping is said to be in contango and a foward curve that is downward sloping is said to be in normal backwardation and is considered to be an inverted market.[2][3] Similar to a commodity that is in contango, an upward sloping yield curve is called a normal yield curve or positive yield curve.[4] Simililar to a commodity that is in normal backwardation, a downward sloping yield curve is called an inverted yield curve.[5] A yield curve indicating short term interest rates and long term interest rates as equal for otherwise equivalent bonds is called a flat yield curve.[6]