inverted yield curve

(redirected from Inverse Yield Curve)
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Related to Inverse Yield Curve: Negative yield curve, Flat Yield Curve

Inverted yield curve

When short-term interest rates are higher than long-term rates. Antithesis of positive yield curve.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Inverted Yield Curve

A yield curve in which the long-term yields on bonds are lower than short-term yields. A normal yield curve trends upward because bondholders expect a larger interest rate for a longer investment; however, if a yield curve turns negative, it indicates that the market believes that demand for long-term debt securities is increasing or will increase, which will drive yields downward. Higher demand for bonds usually occurs when investors believe that stock prices will fall. As a result, an inverted yield curve is a highly bearish indicator and indeed is seen as a predictor of a coming recession. An inverted yield curve is the rarest yield curve. It is also called a negative yield curve.
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inverted yield curve

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.