Finance theory suggests that yield curves on higher-risk (speculative) corporate bonds tend to have a downward (negative) slope or are humped or bowed in shape. Why this might be true is that:

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Speculative bonds are perceived as riskiest when they are newly issued, and as time passes and the issuing company remains solvent, these bonds often appear to improve in quality, leading to a decrease in yield requirements by investors. This can result in a downward-sloping or humped yield curve for these bonds. Choices A and B do not generally explain the shape of yield curves for speculative bonds.

Finance Theory Suggests That Yield Curves on Higher-Risk (Speculative) Corporate