What type of bond have the following yield curve or when it shows the following shape? 1) Upward Sloping 2) Downward Sloping 3) Humped 4) Inverted 5) Flat Thx much to clarify.
don’t really get the question.
I simply try to be able to differentiate and specify what shape illustrates what.
As for the flat yield curve - I think we are seeing that for US treasuries. Go plot the data and you can see that it has flattened over the past week or so. For upward sloping curves, I think the plot for the Samurais are a good illustration…
What does the Samurai to do with the yield curves?
Any bond can take on any shape of the the yield curves. You need to concern yourself with interest rate expectations rather than bond types. Under pure expectations theory… 1) Upward Sloping - interest rates expected to rise 2) Downward Sloping - interest rates expected to fall 3) Humped - expected to rise then fall 4) Inverted - same as downward sloping 5) Flat - expected to remain constant. Keep in mind with Liquidity preference theory we almost always see an upward sloping curve even when the pure expectations curve is downward. This is to compensate for the premium required at longer maturities.
I see. So under different theory, these curves can be interpreted differently. Does upward sloping usually signal normal yield curve / normal economic situation - meaning longer maturity gets higher yield? Inverted curve is abnormal - short term maturity bonds get higher yield than the long term ones and usually signal worsening economy/recession? Downward curve too signals worsenign economy/short-term interest rates go down… Flat one - not sure about this. Normal/worsening/uncertain economy??? Humped one - seems never seen. Meaning mid-term maturity bond gets higher yield than short-term & long-term counterparts??? What kind of econmy would have a humped yield curve?
Humped yield curves happen for all kinds of reasons. For example, during the last years of the Clinton administration, the gov’t swore off long term debt so we had a normal yield curve except that the longer maturities were in demand because the govt wasn’t making any more of them. That meant that the yield for longer maturities was less than intermediate maturities.
hyang Wrote: ------------------------------------------------------- > What does the Samurai to do with the yield curves? Samurais = Japanese bonds. Go get the data and plot it with Excel and you can see how it looks like