medium · Debt Capital Markets pricing-yields-curve
How does the 'term premium' typically affect the shape of the yield curve?
- It creates 'humps' in the curve at the 5-year and 10-year benchmark points.
- It forces the short end of the curve to match the overnight policy rate.
- It causes the curve to invert when inflation expectations are high.
- It adds an upward slope as compensation for the increased price risk of longer-term bonds.
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