The “term structure” of interest rates refers to the relationship between bonds of different terms. When interest rates of bonds are plotted against their terms, this is called the “yield curve”. Economists and investors believe that the shape of the yield curve reflects the market’s future expectation for interest rates and the conditions for monetary policy.

Usually, longer term interest rates are higher than shorter term interest rates. This is called a “normal yield curve” View full article »

About these ads