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Market Watch Weekly | February 26, 2021 | Top Gun Explains the Yield Curve. Thanks Maverick.

Erik Dekker - Feb 26, 2021
Not since the 2 & 10 inversion in 2019 has there been more talk about the “yield curve”. Before we jump into the conversation about what these higher rates mean for the broader economy, we’ll attempt to paraphrase textbooks of material into a few...

Not since the 2 & 10 inversion in 2019 has there been more talk about the “yield curve”. Before we jump into the conversation about what these higher rates mean for the broader economy, we’ll attempt to paraphrase textbooks of material into a few paragraphs. A yield curve is a line that plots yields (interest rates) of bonds having equal credit quality but differing maturity dates. In this instance, we are talking about the yield curve of U.S. government bonds, which, for arguments sake, are the benchmark for all global credit. The slope of the yield curve gives an idea of future interest rate changes and economic activity. There are three main types of yield curve shapes: normal (upward sloping curve), inverted (downward sloping curve) and flat.

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