Question

What factor explains the shape of the Treasury yield curve?

Answer 1

Factors affecting shape of the Treasury Yield Curve are:

1. The long term bond rates and short bond rates affect shape of curve. Higher the demand of short term bonds makes it normal curve and higher the demand for long term bond makes it inverted.
2. Inflation also affects the curve of treasury yield curves. Higher the short term curve will be inverted.
3. Economic condition also affects treasury yield curve. In recession yield curve in inverted.

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