The Yield Curve describes how financial interest rates change over time. The yield “curves†upward over time. It is more expensive to borrow money for 1 year than it is 1 day. Bonds are simply lending, or borrowing. The yield curve is often “controlled†by the Federal Reserve, in some sense. They are the Central Bank of the United States, and have a massive impact on the economy and financial markets.
A yield curve can be flat, steep, or normal. Investors often look to this for indicators of a recession or credit crunch. Stocks are also impacted by the yield curve, and by different interest rates. All financial assets are in a free-market economy.
Capital can be committed in a wide array of assets, and interest rates direct those efforts. If your business is more productive, you can pay a higher amount on your debt because you’ll use it more productively. So, you bid up the interest rate on the lender’s capital. While this isn’t directly tied to yield curves, it’s related.
An inver...
Originally collected by
fetching...
(
less)