More on Interest Rates
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When investing in bonds, understanding their yield is of utmost importance. They reflect the length and interest to be paid to the investor. Here you will learn why yields are indicative of investors' expectations. How would you estimate interest rates in the future using the yield curve?
Using the Yield Curve to Estimate Interest Rates in the Future
The Financial Stress Index
Defined as the rate of difference between a 10-year treasury bond rate and a 3-month treasury bond rate, the Financial Stress Index is a useful tool in projected future economic well-being. In fact, each of the recessionary periods since 1970 have demonstrated an inverted yield curve when subjected to Financial Stress Test just prior to that recessionary period.