Inverted Yield Curve

Inverted Yield Curve A normal yield curve is ascending, e.g., long – term bonds show a greater yield than short – term bonds. An inverted yield curve on the other hand, is descending, showing higher yield on short – term bonds than long – term bonds. This happens when there is a greater demand for short – term credit, and borrowers are unwilling to commit themselves to paying a higher rate of interest of many years. An inverted yield curve is a sign of unsteady economy, with possible spiraling inflation and low level of confidence.

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