What is a yield curve and what are yield curves used for in the financial industry?

2. In a 'normal' market why are yield curves generally upward sloping?

3. When might a yield curve be downward sloping?

4. How would this affect your decision to invest in the bond market?

5. If a yield curve is downward sloping over the 0-2-year bracket and upward sloping over the 2-10-year bracket what does this indicate about market expectations of interest rates?

Transcribed Image Text:

Spread between 2-year note and 10-year note Inverted for first time since June 2007 schw Turns negative for the. first time since 2007 3.0% 2.5 2.0 1.5 1.0 0.5 0.0 -0.5 '02 '03 '04 '05 '06 '07 '08 '09 '10 11 12 13 14 15 16 17 18 19 Source: Federal Reserve Bank of St. Louis Spread between 2-year note and 10-year note Inverted for first time since June 2007 schw Turns negative for the. first time since 2007 3.0% 2.5 2.0 1.5 1.0 0.5 0.0 -0.5 '02 '03 '04 '05 '06 '07 '08 '09 '10 11 12 13 14 15 16 17 18 19 Source: Federal Reserve Bank of St. Louis

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