Long-Term Behavior of Yield Curves

10 Pages Posted: 18 Jun 2004 Last revised: 28 Mar 2010

See all articles by Charles R. Nelson

Charles R. Nelson

Dept of Economics

Andrew F. Siegel

University of Washington - Department of Finance and Business Economics; National Bureau of Economic Research (NBER)

Date Written: 1986

Abstract

The flattening of yield curves at long-term maturities is proven to be approximately proportional to the reciprocal of the time to maturity under general conditions. This is a consequence of the persistence of earlier forward rates in the averaging process which produces yields from forward rates. This relationship suggests the use of a"reciprocal maturity yield curve" which significantly facilitates the interpretation of the behavior of long-term yields by linearizing them for display over a shorter interval. This is illustrated using a yield curve for U.S.Treasury bills.

Suggested Citation

Nelson, Charles R. and Siegel, Andrew F., Long-Term Behavior of Yield Curves (1986). NBER Working Paper No. w1789, Available at SSRN: https://ssrn.com/abstract=227411

Charles R. Nelson (Contact Author)

Dept of Economics ( email )

Box 353330
Seattle, WA 98195-3330
United States

Andrew F. Siegel

University of Washington - Department of Finance and Business Economics ( email )

Box 353200
Seattle, WA 98195
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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