Negative Yield Curve

Yields on short-term securities are higher than those on long-term securities of the same quality. Normally, short-term rates are lower than long-term rates because capital committed for longer periods is more risky. However, if interest rates go too high, borrowers become unwilling to lock themselves into high rates for long periods and borrow short-term instead. Therefore, yields rise on short-term funds and fall or remain stable on long-term funds.