Define: Normal Yield Curve

UK Accounting Glossary

Definition: Normal Yield Curve



Advertisement



Full Definition of Normal Yield Curve


The normal yield curve is a yield curve with interest rates gradually rising as the term increases. The shape of the normal yield curve can be understood in terms of risk. The normal yield curve is a consequence of higher interest rates to compensate for the greater risk associated with the increased uncertainty. Historically, the market has had a normal yield curve most of the time. If short-long spread becomes sufficiently wide, the market is said to have a steep yield curve rather than a normal yield curve. The normal yield curve can also turn into a flat yield curve if the spread narrows, or possibly an inverted yield curve, if the spread reverses. With a normal yield curve, banks make a reasonable profit by paying less on short-term deposits than they make on long-term loans. A normal yield curve is considered healthy for not only for the financial sector but also the economy.


Advertisement




Cite Term


To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
https://payrollheaven.com/define/normal-yield-curve/
Modern Language Association (MLA):
Normal Yield Curve. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. March 31, 2020 https://payrollheaven.com/define/normal-yield-curve/.
Chicago Manual of Style (CMS):
Normal Yield Curve. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/normal-yield-curve/ (accessed: March 31, 2020).
American Psychological Association (APA):
Normal Yield Curve. PayrollHeaven.com. Retrieved March 31, 2020, from PayrollHeaven.com website: https://payrollheaven.com/define/normal-yield-curve/

Definition Sources


Definitions for Normal Yield Curve are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 7th February 2020.