The upward slope of the yield curve is caused by investors' recognition of the relative difficulty of converting long-term securities to cash. This is the:

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The liquidity preference theory states that the shape of the term structure curve tends to be upward-sloping more than any other pattern. This reflects recognition of the fact that long maturity obligations are subject to greater price-change movements when interest rates change. Because of the increased risk of holding longer-term maturities, investors demand a higher return to hold long-term securities relative to short-term securities. This is called the liquidity preference theory of interest rates. Since short-term securities are more easily turned into cash without the risk of large price changes, investors pay a higher price for short-term securities, and thus receive a lower yield.

The Upward Slope of the Yield Curve Is Caused by Investors