FoundationMultiple choice
Reading the curve · Part 1 of 3
The one-year zero rate is 4.0% and the two-year zero rate is 4.5%, both annually compounded. The ten-year yield is 3.5%.
The two-year yield is above the ten-year yield. What is this usually read as?
- AMarkets expect rates to fall, often ahead of slower growth
- BInflation is expected to rise sharply and persistently over the next decade
- CLong bonds are riskier, so they must pay less to compensate
- DNothing, because the level of rates is all that matters
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