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How to Interpret the Inversion of the Yield Curve? - Financial Digits
Before we get into the details of how to interpret the inversion of the yield curve, let us first see what a yield curve is and what it represents. The yield curve is a graphical portrayal of yields on comparable bonds over an assortment of developments. An ordinary yield curve inclines upward, showing that short-term interest rates are typically lower than long-term interest rates. That is an effect of higher hazard premiums for long-term ventures. An inverted yield curve represents a circumstance where long-term debts maintain lower yields than short-term debts. There are three fundamental curve types, including the inverted yield curve, which is considered as the rarest of the three. Bonds To understand the inversion of the yield curve, you must first know about bonds. The inversion of the yield curve is closely related to the yields on the treasury bonds or government bonds. A bond resembles an IOU that you receive at a bank. Extremely Stable Investment Guaranteed Return
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