Yield Curve - Definition

A Yield Curve is a graphical representation showing the relationship between bond yields and their maturity dates. The horizontal axis represents time to maturity. The vertical axis shows the corresponding yields. Yield curves are fundamental tools for investors, economists, and policymakers. They help gauge market expectations and economic conditions.

Yield Curve Risk

Yield Curve Risk refers to the potential adverse effects of changes in interest rates on fixed-income returns. Bond prices and interest rates have an inverse relationship.

When market interest rates increase, bond prices decrease, and vice versa. Managing yield curve risk is crucial for investors. It helps protect portfolios from unfavorable interest rate movements.

Things to Remember

• Yield Curve Definition: A yield curve graphically represents the relationship between bond yields and their maturities. It provides insights into market expectations and economic conditions.