Yield Curves*

• map the relationship between spot rates and maturity
• usually upward sloping because future investors require higher incentives to leave money in the market longer
• a dip in the yield curve often predicts an economic slowdown --> RISK
• short term prices fall - decrease in demand
  
• long term prices rise - increase in demand
  
• nervous investors buy long term securities because they fear what will happen in the near term

*content based on lecture notes from Jennifer Conrad's Financial Tools. UNC Kenan Flagler