Euro area business cycle dating committee

The economic position of the countries and companies using each currency is a primary factor in determining the yield curve.Different institutions borrow money at different rates, depending on their creditworthiness.The yield for the 10-year bond stood at 4.68%, but was only 4.45% for the 30-year bond.The market's anticipation of falling interest rates causes such incidents.In general the percentage per year that can be earned is dependent on the length of time that the money is invested.

This explanation depends on the notion that the economy faces more uncertainties in the distant future than in the near term.The shape of the yield curve is influenced by supply and demand: for instance, if there is a large demand for long bonds, for instance from pension funds to match their fixed liabilities to pensioners, and not enough bonds in existence to meet this demand, then the yields on long bonds can be expected to be low, irrespective of market participants' views about future events.The yield curve may also be flat or hump-shaped, due to anticipated interest rates being steady, or short-term volatility outweighing long-term volatility.Yield curves continually move all the time that the markets are open, reflecting the market's reaction to news.A further "stylized fact" is that yield curves tend to move in parallel (i.e., the yield curve shifts up and down as interest rate levels rise and fall).