Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Flat Yield Curve

What it is:

Flat yield curve refers to a yield curve which reflects little or no disparity between short-term and long-term interest rates.

How it works (Example):

A flat yield curve is essentially a horizontal line representing similar yields for short-term and long-term debt securities in the same credit category, as shown below:

Under these circumstances, for instance, a bond with a 30-year term would have virtually the same yield as a similarly-rated bond with only a five-year term.

Why it Matters:

A flat yield curve indicates that there is no immediate benefit to investing in long-term securities over short-term securities since the yield on either is essentially the same.