A yield curve is a graphical presentation of the yield of bonds or securities of the same credit quality at various maturity levels. A Flat Yield Curve is a relatively flat curve of a yield. To know more about it, click on the link given below: https://efinancemanagement.com/investment-decisions/flat-yield-curve

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eFinanceManagement.com
https://efinancemanagement.com/investment-decisions/flat-yield-curve
Flat Yield Curve

2. 1. Meaning
2. Reasons
3. Different from Normal, Inverted & Steep Yield Curve
4. What do Investors need to do?
5. Reference
Content

3. A yield curve is a graphical presentation of the yield of bonds or securities of the same credit quality at various maturity
levels. A Flat Yield Curve is a relatively flat curve of a yield. It implies that there is very little difference between the short
and long-term interest rates.
Meaning

4. The reasons for flat yield curve are:
• Occurs when the expected interest rates are stable.
• The short-term volatility is more than the long-term volatility.
• The long-term interest rates drop more than the short-term rates.
• The short-term rates rise more than the long-term rates.
Reasons

5. We see a flattening curve when an economy shifts from a normal to inverted state.
A normal yield curve slopes upward from left to right and shows normal behavior.
We usually see an inverted yield curve before the recession which means the short-term bonds offer more return to the
investors than the long term securities. Though this is an inverse of a normal scenario, it is logical.
Steep yield curve is the opposite of the flat yield curve. In this situation, the difference between the short and long term
yield is the maximum.
Different from Normal, Inverted & Steep Yield Curve

6. One tested strategy in such a scenario is the barbell strategy. This strategy is useful for investing in fixed-income
instruments and trading. The strategy is very simple and effective. It suggests that the investor should invest half of its
portfolio in long-term bonds and the remaining portfolio in short-term bonds.
What do Investors need to do?

7. Reference
To know more about it, click on the link given below:
https://efinancemanagement.com/investment-decisions/flat-yield-curve