Yield curve

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Market rates for different maturities of funds are usually different, with longer term rates often - but not always - being higher.

A yield curve describes today’s market rates (usually per annum) on fixed rate funds for a series of otherwise comparable securities, having different maturities.


There are three ways of expressing today’s yield curve:

  1. Zero coupon yield curve.
  2. Forward yield curve.
  3. Par yield curve.


If any one of the curves is known, then each of the other two can be calculated by using no-arbitrage pricing assumptions.

The shape of today's yield curve is influenced by - but not entirely determined by - the market's expectations about future changes in market rates.


The yield curve is sometimes also known as the Term structure of interest rates.


See also


Other links

Treasury essentials: Yield curves, The Treasurer, September 2013

Students: Simple solutions, The Treasurer, September 2013