What is the Yield Curve telling us about the future?
With interest rates front and center these days, I thought we would take some time to explore the yield curve and some of the information that can be gleaned from it. The yield curve represents the relationship between interest rates on bonds of different maturities, but equal credit quality. For our purposes, we'll be discussing the US Treasury yield curve.
The slope of the yield curve has proven to be a good forecaster of economic growth. There are three basic shapes the yield curve can take, each with different implications regarding economic growth. We'll explore these below and then take a look at the what the current yield curve is saying.
A normal, upward sloping yield curve is shown below. This is how the yield curve looks when an economy is growing and investors are confident. In a growing economy, investors demand additional premium ... Log in or subscribe to continue reading.
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