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What are the importance of yield curves to investors?

Answer:

Yield Curves ( for an example see: http://www.bloomberg.com/markets/rates/index.html ).
The Yield Curve is a graphic plot of Yields to Maturity for Benchmark Government Securities (vertical axis) versus the Time to Maturity (expressed in Years, Horizontal Axis).

The Shape of the Yield Curve shows investors what the market consensus is on Interest Rate expectations for the future. For example a steeply upward sloping Yield Curve as we have at the time of writing implies that investors expect interest rates to rise very considerably over the coming months and years.

The Yield Curve can also be used simply to illustrate where in the maturity spectrum the highest or lowest yields are available.

Corporate and other Non-Government securities (see www.davidandgoliathworld.com) are typically priced at a yield spread (extra yield) over the Government Yield Curve - which therefore in turn implies that the Government Yield Curve is necessary information for anyone looking to issue or invest in Corporate Bonds

First answer by Beaufer99. Last edit by Beaufer99. Contributor trust: 1 [recommend contributor ]. Question popularity: 2 [recommend question].

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