Bloomberg’s Caroline Baum on the Treasury Yield Curve

As usual, Caroline presents a concise summary of the current state of the Treasury Yield Curve and what it “means” for investors (click here to read full article).

The yield curve is partly a reflection of expectations. For example, why would an investor be willing to accept a 4.76 percent return for 10 years when he can earn 5.14 percent buying a three-month Treasury bill and rolling it over when it matures?

Answer: Because said investor doesn’t expect the 5.14 percent short-term yield to be available over the 10-year horizon. (The fact that most traders think about the next 10 days, not years, is irrelevant to our discussion of expectations theory.)

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