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Introduction to the yield curve | Stocks and bonds | Finance & Capital Markets | Khan Academy

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Introduction to the treasury yield curve. Created by Sal Khan. Watch the next lesson: https://www.khanacademy.org/economics-finance-domain/core-finance/stock-and-bonds/bonds-tutorial/v/relationship-between-bond-prices-and-interest-rates?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Missed the previous lesson? Watch here: https://www.khanacademy.org/economics-finance-domain/core-finance/stock-and-bonds/bonds-tutorial/v/introduction-to-bonds?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Finance and capital markets on Khan Academy: Both corporations and governments can borrow money by selling bonds. This tutorial explains how this works and how bond prices relate to interest rates. In general, understanding this not only helps you with your own investing, but gives you a lens on the entire global economy. About Khan Academy: Khan Academy offers practice exercises, instructional videos, and a personalized learning dashboard that empower learners to study at their own pace in and outside of the classroom. We tackle math, science, computer programming, history, art history, economics, and more. Our math missions guide learners from kindergarten to calculus using state-of-the-art, adaptive technology that identifies strengths and learning gaps. We've also partnered with institutions like NASA, The Museum of Modern Art, The California Academy of Sciences, and MIT to offer specialized content. For free. For everyone. Forever. #YouCanLearnAnything Subscribe to Khan Academy’s Finance and Capital Markets channel: https://www.youtube.com/channel/UCQ1Rt02HirUvBK2D2-ZO_2g?sub_confirmation=1 Subscribe to Khan Academy: https://www.youtube.com/subscription_center?add_user=khanacademy
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Text Comments (46)
RRAMOS (7 days ago)
thank you for the quick break down sir!
Brock Story (6 hours ago)
Yes we're screwed!!!
JB (1 month ago)
8:08 to 9:27 (very useful for rate determination/pricing)
Momin Nz (1 month ago)
so in theory is yield and yield curve different? is yield and current yield same? is yield and interest rate same? is the yield curve and interest rate the same?
Nishant Gogna (2 months ago)
What does it mean when the yield curve is flattening?
Nicholas Blake (1 month ago)
The reason why short term yields rise above long term yields (which logically shouldnt happen in a good economy) is because bond investors bid up long term T-notes and bonds (10-30 years) in anticipation of the Fed (central banks) lowering interest rates and thereby raising prices, which current bond holders gain on. So it is anticipation of Fed action in response to a bad economy that the yield curve inverts.
Jesse Glaser (2 months ago)
Short-term rates are rising to the point that they are nearing the yield of long-term rates. This is a bad sign because banks are gaining less interest (banks receive interest on long-term loans and pay interest on short-term loans), AKA their net interest margin. A flattening, and eventually, inverted yield curve has predicted the last 7 recessions.
JOSHUA ASUQUO (2 months ago)
Good teaching, good learning.
Deep Sarkar (4 months ago)
Does the government/ fed calculate or take into consideration the time value of money while determining the yield?
Kane Knight (12 days ago)
Government doesn't determine the yield, the market does.
Mudit Jain (4 months ago)
This is just before the recession(march 2008) and the 1-month, 3-month yield curve is starting to getting inverted!
Anonymous (5 months ago)
How did Khan get so smart? Did he fuse with wikipedia?
z d (5 months ago)
Why hasn't this video been demonetized yet? It is explaining elements of capitalism and capitalism is bad! Right comrades???
james panos (7 months ago)
Couldn't the fed pay back the bonds by printing money instead of raising taxes depending on the climate of the economy.
Isaiah Paul (2 months ago)
They do! Look up Modern Monetary Theory.
Nicolai Loner (2 months ago)
Yeah ...print more money....said no educated person ever
james panos (4 months ago)
Josef , I understand how hyperinflation works. printing may be the only option the fed has, especially at the end of our massive debt cycle. thus there bond is guaranteed but the value of the dollar might be less by the time your loan is paid. so raising taxes is not the only way to pay back a loan. a bond is only secure if the dollar is on the gold standard.
Josef (4 months ago)
james panos That causes Hyperinflation which ruins economies. Suggest you look up hyperinflation
Evans Asamoah (7 months ago)
awesome presentation .thx
Adam Paxton (7 months ago)
nice video but what a crap plot lol XD
09ThunderOne (7 months ago)
Prepare for this video to get a lot more views
Ben Zemła (8 months ago)
Awesome! Thanks for teaching me what the yield curve is. But are the loans to the government really a safe investment as government debt is exponentially increasing?
Daffodil Hines (9 months ago)
I love you voice :-) communication is very clear :-)
Gabriel Sato (1 year ago)
I would like to address a question regarding the relation between the demand on bonds and the interest rates. Why does the interest rates go lower when you have more demand? Does it have something to do with the fact that if more people have the T-bill/note/bond the government will have more expenses with the higher interest rate?
OT90 (10 months ago)
Due to inverse relationship between Yield and Price of Bonds, I think
Knox Kiernan (1 year ago)
Could be a good opportunity to discuss points of inflection.
Okan Aybar (2 years ago)
please note that you should annualize the rates shorter than 1 year and then plot the graphic accordingly.
Shakaama (5 years ago)
hey Khan you should make videos for the CFA JUST FOR ME :) I literally am banging my head on my keyboard to try and get the information in. The books are BORING. I am rereading each paragraph like 5 times. It just is not sinking in.
AnnexGroup (6 years ago)
Great video. Thanks for the knowledge.
Binyameen Farooq (6 years ago)
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Forthe Good (6 years ago)
Where do you teach? Wow! I have been in my text for hours trying to make sense of this (currently taking Financial Inst and Society), and it's been difficult to understand in simple terms. Thank you, you have great communication skills an absoultely marvelous voice! Thank you so much!
Sahil Bhatia (7 years ago)
Cleared the topic in just 15 min...thanks
zotam (7 years ago)
Khan, your tutors are so insightful. this really is a revolutionary achievement. Keep it up.
eds550 (8 years ago)
good one Mr Khan
Oliver Hernandez (8 years ago)
can yuo explain the iverted yield curve?
Leah Nadeau (9 years ago)
Why would the two year rate be greater than the one year rate? There are two basic reasons: 1. If inflation is expected to be higher—the expectations hypothesis 2. If investors prefer short-run investment horizons and need to be enticed (with higher rates) to buy longer maturities—the maturity preference hypothesis.
Akshay Bhatnagar (9 years ago)
Wonderful!!
Emil Suric (9 years ago)
Or they could print and inflate the money supply.
Jericho Carpate (9 years ago)
thank you for all your videos, great stuff
mrjaywilliams (9 years ago)
The only worrying thing is that previous bonds paid off are being financed with new bonds issued . Not good for treasury's credit rating, and it won't be too long before foreign buyers of govenment bonds wise up.
Andy Chu (9 years ago)
wonderful!!!
invasions (10 years ago)
Wonderful presentation. Many thanks for your time putting this together for us.
Alexzandre EspinozA (10 years ago)
Yea, dumbass, it is called subscribeing to the user.
Nandine Maktadir (10 years ago)
Do you have any videos on Algebraic Long Division? could not find them in the algebra section. good video btw..
Khan Academy (10 years ago)
One mistake in the video. T-bills are for maturities up to and including 1 year. T-notes are for 2-10 years (I mistakenly said that the 1-year maturity would be a t-note)
Wendy Wolfe (1 year ago)
you're still AWESOME!

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