Identify the different types of yield curves and explain what they indicate for the U.S economy? What is the current shape of the yield curve and why is it shaped that way?
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There are 3 types of yield curves
1)flat yield curve
2) inverted yield curve
3) normal yield curve
1) normal yield curve indicates that the investors are expecting interest rates to raise in the future so yield will increase with increase in time to maturity and this will indicate a growth economy
2) flat yield curve indicates that the investors are expecting interest rates to remain same over the period of time and it indicates stable economy
3) inverted yield curve indicates that investors are expecting interest rates to fall in future this indicates recession in the economy
4) present yield curve of United States are normal that means that the investors are expecting interest rates to be high in future and prosperous state in United States economy
Present yields are
2y = 0.186
So interest rates are rising over time so yield curve is normal
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