Treasury debt is lower than yield on five-year treasury debt

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Reference no: EM131510766

You observe that the yield on one-year U.S. Treasury debt is lower than the yield on five-year U.S. Treasury debt. This is typically true because:

Investors expect inflation will be decreasing.

Investors require additional compensation since bonds with shorter maturities are always less liquid.

Investors demand compensation for accepting the higher interest rate risk of bonds with longer maturities.

The default risk-premium is decreasing.

The yield curve can never be downward sloping.

Reference no: EM131510766

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