What are bonds yields?
The yield of a bond is the effective rate of return that it earns. But the rate of return is not fixed — it changes with the price of the bond.
What is a yield curve ?
A yield curve is a graphical representation of yields for bonds (with an equal credit rating) over different time horizons.
Typically, the term is used for government bonds — which come with the same sovereign guarantee. So the yield curve for US treasuries shows how yields change when the tenure (or the time for which one lends to the government) changes.
What is yield inversion ?
Yield inversion happens when the yield on a longer tenure bond becomes less than the yield for a shorter tenure bond.
A yield inversion typically portends a recession. An inverted yield curve shows that investors expect the future growth to fall sharply; in other words, the demand for money would be much lower than what it is today and hence the yields are also lower.
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