标题: Fixed Income - Yield Curve Question [打印本页] 作者: joemoran 时间: 2013-4-21 10:57 标题: Fixed Income - Yield Curve Question
Hey everyone! First time posting here and I need some help with a QBank question:
QBank: Generally speaking, an upward-sloping yield curve can be expected when:
Answer: the supply of long-term funds falls short of demand and investors begin to show a preference for more liquid/less risky short-term securities.
As I understand it, more preference for more liquid/less risky short-term securities can be expected to drive up long-term rates as the liquidity premium rises.
But what I don’t understand is, if demand for long-term funds is greater than supply, doesn’t that mean the price of those long term bonds will rise, causing yields to go down, thus resulting in a downward-sloping yield curve?
