When a yield curve has a negative slope:
A) long-term yields are higher than short-term yields.
B) short-term yields are higher than long-term yields.
C) the money market is expecting default by issuers of bank bills.
D) the inflation rate is expected to rise.

Question

Quizplus · Accepted Answer

When a yield curve has a negative slope, it means that short-term yields are higher than long-term yields. This is also known as an "inverted" yield curve and is often seen as a sign of an upcoming recession or economic slowdown. It suggests that investors have a negative outlook on the economy in the short term and are demanding higher returns for investing in shorter-term securities.

When a Yield Curve Has a Negative Slope