Economics Bonds Questions
The bond yield curve is a graphical representation of the relationship between the yield or interest rate of bonds and their respective maturities. It plots the yields of bonds with different maturities on the vertical axis and the corresponding maturities on the horizontal axis. The curve typically slopes upward, indicating that longer-term bonds tend to have higher yields compared to shorter-term bonds. This is because investors generally require higher compensation for the increased risk and uncertainty associated with holding longer-term bonds. The shape of the yield curve can provide insights into market expectations about future interest rates and economic conditions.