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flat yield curve

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Flat Yield Curve
A chart that shows that the yields of bonds with short maturities are equal to the yields of bonds with longer maturities.



Notes:
When short and long term bonds are offering equivalent yields, investors should choose the bond with the least amount of risk.


flat yield curve
At a particular time, similar yields on bonds of similar risk at all maturity lengths. During a period of a flat yield curve an investor would receive approximately the same yield on a long-term bond as he or she would on a short-term bond, although the former would be subject to greater price fluctuations.

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Short-term rates have moved dramatically upward, but the rise in longer-term rates has been slower, resulting in a flat yield curve.
Given the relatively flat yield curve for most of 2003, it did not make economic sense to ride the yield curves, since spreads had narrowed and managers remained concerned with volatility of longer maturity investments.
Today's flat yield curve signals moderate to slow economic growth and expectations for lower inflation--both of which are better for long-term bonds, according to Mark Lay, chairman and CEO of MDL Capital Management Inc.
 
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