Investor Glossary-negative yield curveInvestor Glossary-negative yield curveInvestor Glossary-negative yield curveInvestor Glossary-negative yield curveInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Negative Yield Curve

The HTML to link to this page
 

A negative yield curve has short-term rates, or yields, higher than the most long-term yields. A negative yield curve is an abnormal condition. Bank margins get squeezed when a negative yield curve emerges. The negative yield curve occurs because the market sets long-term yields, but the Fed has significant control over short-term yields. The usual explanation for how the negative yield curve can persist when the Fed drives up short-term yields is that investors expect long-term yields to become even lower in the future, so they lock up money at the best rate available, negative yield curve or not. Bond market participants expect falling long-term yields despite a negative yield curve when they anticipate an economic slowdown. The bond market is usually right. Since the 1960s, almost every negative yield curve instance, of which there have been over a dozen so far, has been followed by a recession. Some analysts speculate the significance of the negative yield curve as a recession predictor may be diminishing because structural factors such as globalization are changing the market forces driving long-term yields.



Rate this negative yield curve definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: FICO score, Key Rate Duration, implied volatility, 144a, required rate of return, class C shares, open position, Zero Cost Collar, ex-dividend date, retained earnings, LIBOR, stock split, EBITDA, ex-dividend, limit order, balance sheet, FTSE, deferred tax, liquidity ratio, 1031 exchange, per diem, deferred revenue, reverse mortgage, cancelled check, stock market close, margin rate, current ratio, diluted share, dividends payable, real GDP, in escrow, risk management, APR, irrevocable trust, command economy, quality assurance, wholly-owned subsidiary, 1035 exchange, option premium, VIX, covered put, labor relations, average price per share, inflation, phantom income, minority interest, 401a, debt service coverage, annual return


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Investor Glossary | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use