- 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 rates; however, the yield curve is negative, or inverted, when long term rates are lower than short term rates. Chicago Board of Trade glossary————A graph showing the relationship at a selected point in time between the available maturities of a security or similar securities with essentially identical credit risk and the yields that can be earned for each available maturity. A graphical depiction of the term structure of interest rates at any given point in time. Yield curves may be constructed for different instruments such asTreasury securities, AAA-rated municipal bonds, A-rated corporate bonds, etc. Even within the field of Treasury securities, yield curves are constructed from many different types of Treasury rates. When a yield curve is constructed by calculating the coupon rates necessary for the Treasury obligations of various maturities to be priced at par, it is called a par yield curve. When a yield curve is constructed using currently prevailing rates for instruments available for cash delivery, it is called the spot curve. When a yield curve is constructed using currently prevailing rates for instruments to be delivered at future dates, it is called the forward yield curve. When a yield curve is calculated using currently prevailing rates for interestbearing Treasuriy securities, it may be referred to as a coupon curve. When a yield curve is calculated using currently prevailing yields for zero coupon instruments, it is called the zero coupon curve. American Banker Glossary————The graphic depiction of the relationship between the yield on bonds of the same credit quality but different maturities ( maturity). Related: term structure of interest rates. Harvey (1991) finds that the inversions of the yield curve (short-term rates greater than long term rates) have preceded the last five US recessions. The yield curve can accurately forecast the turning points of the business cycle. Bloomberg Financial Dictionary————A chart that graphically depicts the yields of different maturity bonds of the same credit quality and type. Yield is depicted on the vertical axis and maturity on the horizontal axis. The yield curve is also called the "Term Structure of Interest Rates." A normal yield curve is upward sloping, with short-term rates lower than long-term rates. An inverted yield curve is downward sloping, with short-term rates higher than long-term rates. A flat yield curve occurs when short-term rates are the same as long-term rates. Chicago Mercantile Exchange Glossary————A diagram showing the relationship between yields and maturities for a set of similar securities or interbank deposits. LIFFE
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The graphical representation of the yields of a set of bonds or other instruments with the same credit risk and currency, but different maturities. Yield is plotted along the vertical axis and time to maturity on the horizontal axis. There are many different yield curves, including government benchmark curves, deposit curves, swap curves and credit curves. Benchmark curves consist of securities that meet certain criteria for liquidity, size, price, availability, turnover rate and other characteristics. These securities set standards for the market against which other issues can be measured. A yield curve is not static and can change quickly at any time. For example, a word or two from a central banker can fuel expectations of higher inflation, which may cause longer-term debt prices to fall more than short-term prices. The nominal yield curve is positive, rising from left to right, because yields on longer maturities are higher than on short maturities to reflect the greater risk of lending money for a longer time. If the yield curve is positive sloping it will steepen as the longer yields move up more than the shorter ones. An inverted, or negative, yield curve slopes downward from left to right, with short-term yields higher than long-term yields. Investors may be expecting a reduction in inflation in the longer term or there may be expectations of sharply reduced supply of bonds, both of which will depress yields. (Figure 18.)► See also Maturity.* * *
yield curve UK US noun [C] FINANCE, GRAPHS & CHARTS► a line on a graph that shows the relationship between the interest rate of bonds and the time left until they have to be paid back: »Hong Kong is one of the few Asian debt markets to have a benchmark yield curve for maturity up to 10 years.
»a flat/inverted/rising yield curve
Financial and business terms. 2012.
