Inverted yield curve,
Definition of Inverted yield curve:
The yield curve is a graphical representation of yields on similar bonds across a variety of maturities, also known as the term structure of interest rates. A normal yield curve slopes upward, reflecting the fact that short-term interest rates are usually lower than long-term rates. That is a result of increased risk and liquidity premiums for long-term investments.
A situation in which long-term debt instruments are returning a lower yield than short-term notes, resulting in a downward tilting yield curve. An inverted yield curve is generally seen as an indication that investors foresee an economic downturn. Compare to Normal Yield Curve.
An inverted yield curve represents a situation in which long-term debt instruments have lower yields than short-term debt instruments of the same credit quality. An inverted yield curve is sometimes referred to as a negative yield curve.
How to use Inverted yield curve in a sentence?
- An inverted yield curve reflects a scenario in which short-term debt instruments have higher yields than long-term instruments of the same credit risk profile.
- Typically, long-term bonds have higher yields than short-term bonds, and the yield curve slopes upward to the right.
- Because of the reliability of yield curve inversions as a leading indicator, they tend to receive significant attention in the financial press.
- An inverted yield curve is a strong indicator of an impending recession.
- Investor preferences of liquidity and expectations of future interest rates shape the yield curve.
Meaning of Inverted yield curve & Inverted yield curve Definition