25 Oct 2018
Interest Rates: Yield Curve
- Posted by Dejan Pekic BCom DipFP CFP GAICD, Senior Financial Planner
The normal is for long term interest rates to be higher than short term interest rates.
However short term interest rates are rising which is flattening the yield curve.
The concern is when the yield curve becomes inverted (short term interest rate are higher than long term interest rates) because in the past this has marked the beginning of an economic downturn.
Currently the US 3 month Treasury Bill Rate is 2.34% (was 1.09% 12 months ago) and the US 10 year US Treasury Bond Rate is 3.10% (was 2.39% 12 months ago).
The gap has narrowed from 1.3% to 0.76% which is why we are seeing the yield curve flatten.
Click for Yield Curve Basics.
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