Bond Basics: How to Read the Yield Curve
This lesson was written by Stockpickr member Ira Krakow.
If you did the homework assignment in "The Basics of Bond-Picking: Pricing and Quotes," you would have discovered that, in general, the yield to maturity of a bond increases as the maturity date goes farther into the future.
In a normal situation, you should be paid more interest when you hold a bond for a longer a period of time. Why? You're taking the risk that bond prices could fall (which means interest rates could rise), over a longer period of time.
So what is the often discussed "yield curve" all about?The yield curve is simply a graph of the relationship between interest rates and maturity dates. Here's the current Treasury yield curve, from Bloomberg:
|Click here for larger image.|
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