Which of the following affects the slope of yield curve?

Question

Quizplus · Accepted Answer

Yield curve slope is mostly affected by the liquidity preferences of investors. Yield curve inversion occurs when short-term rates rise above long-term rates which reflects the situation where investors are willing to accept lower interest rates in the future due to expectations of economic downturn or recession. This results in the flattening or inverting of the yield curve. This change in investor sentiment arises due to several factors such as the general economic outlook, monetary policy decisions of central banks, market risk, and investor preferences.

Which of the Following Affects the Slope of Yield Curve