Glossary of Municipal Securities Terms


A graph that plots market yields on securities of equivalent quality but different maturities at a given point in time. The vertical axis represents the yields, while the horizontal axis depicts time to maturity. The relationship of interest rates over time, as reflected by the yield curve, will vary according to market conditions, resulting in a variety of yield curve configurations, as follows:

(1) Normal or Positive Yield Curve – Indicates that short-term securites have a lower interest rate than long-term securites.


(2) Inverted or Negative Yield Curve – Reflects the situation of short-term rates exceeding long-term rates.


(3) Flat Yield Curve – Reflects the situation when short- and long-term rates are approximately the same.

(4) Humpbacked or Bell-Shaped Yield Curve – An unusual shape, indicating that rates are low in the early years, peak in the middle years and decline in later years.


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