Long-Term Behavior of Yield Curves

Andrew F. Siegel and Charles Nelson

Journal of Financial and Quantitative Analysis, 1988, vol. 23, issue 1, 105-110

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.

Date: 1988
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Working Paper: Long-Term Behavior of Yield Curves (1986)
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