Yield Curve Is More Inverted Than at This Point in Run-Up to Financial Crisis

Re:Yield Curve Is More Inverted Than at This Point in Run-Up... by cesarb on Tuesday March 26, 2019 @12:04PM (#19493065)

With a 10-year bond, the investor receives that interest rate over the whole 10 years. With a 6-month bond, the investor receives that interest rate only over these 6 months, and then has to find another bond to buy. If all available bonds then have a lower interest rate, the investor would have received more for the 10-year bond.

(What might be confusing at first is that interest rates are usually "annualized", that is, presented as if they were for a single whole year. You won't actually receive 2.49% of what you paid for the 6-month bond; you'll receive something like 1.24%, and you have to invest again for another 6 months to reach that 2.49%. If that investment is no longer available, you might not be able to do that.)

[ Parent | on HN ]

Re:Yield Curve Is More Inverted Than at This Point in Run-Up... by stoddler on Wednesday March 27, 2019 @02:16AM (#19498522)

One can invest it again in a 6 month bond with the yield curve inverted further. The decrease in rates would happen over a longer term than 6 months. And also if the rates have decreased the prices would have increased for the bond that is held.

[ Parent | on HN ]