{"product_id":"stcov311unyi1","title":"Stocks \u0026 Commodities V. 31:12 (12-19): Understanding The Yield Curve, Part 2 by Giorgos E. Siligardos, Ph.D.","description":"Understanding The Yield Curve, Part 2 by Giorgos E. Siligardos, Ph.D.\u003cbr\u003e\u003cbr\u003eThe World Of Yields\u003cbr\u003e\u003cbr\u003eLast month in part 1, we presented the basics of yield curve analysis. Here, we\nreview its historical performance in various countries through the use of yield\nspread indicators.\u003cbr\u003e\u003cbr\u003eWhat constitutes a positive\nor negative yield curve?\nThe strict definition is that\na yield curve (YC) is positive when\nall of its parts are rising; its negative\nwhen all of its parts are falling; and\nits flat when its a straight horizontal\nline. Oftentimes, however, the YC\nis close to being considered positive\nor negative even though parts\nof it usually the far left and\/or\nfar right do not conform to the\nstrict definition (Figure 1). Further,\nit is almost impossible for the yields\nof all maturities to be exactly the\nsame, which means that if you go\nby the strict definition of a flat curve,\nrealistically you will probably never\nfind a flat curve. From studying past\nperformance of yield curves, I have\nfound that these loosely positive\nand negative curves have similar\nimplications for the economy as the\noutright positive and negative ones\ndo. This is why it is necessary to be\nmore flexible in defining the YC. The\nsimplest way to do this is through\nyield spread indicators.\u003cbr\u003e\u003cbr\u003eYield spread indicators\u003cbr\u003e\u003cbr\u003eAcademics usually study differences\n(known as spreads) between longand\nshort-term government debt\nsecurities (GDS) as surrogates of the\nYC shape in order to see how well\nthey relate to business and economic\ncycles. Practitioners study these\nspreads to help them make better\ninvestment decisions in the stock\nmarket (Figure 2). The most popular\nspread (and considered the best by\nmany analysts) is the three-month\/10-\nyear spread, which is computed by\nsubtracting the yield of GDS that\nmature in three months from the yield\nof GDS that mature in 10 years. When\nthe spread is positive, the YC is considered\npositive and when the spread\nis negative, the YC is considered\nnegative. Other similar short-term\/\nlong-term spreads are believed to\nunderperform the three-month\/10-\nyear spread, but not by much.","brand":"store-traders-com","offers":[{"title":"Default Title","offer_id":52134151291249,"sku":"V31C12_663SILI","price":4.95,"currency_code":"USD","in_stock":true}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/0900\/3843\/6209\/files\/unnamed_384a34f7-06de-4b67-b832-28c50035227e.jpg?v=1739668929","url":"https:\/\/shop.traders.com\/products\/stcov311unyi1","provider":"Stocks \u0026 Commodities","version":"1.0","type":"link"}