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.
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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.
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[@cristobaltrujillohermosill1473]

Bro this dude knows everything from physics, calculus, linear algebra to finance, etc.

[@neodyinrich]

factss

[@jereicahhess6864]

Hahahaha that's what I was thinking!

[@hawkeye4469]

Sal knows everything

[@Son_of_Adam_07]

His team members bro

[@Tarequr]

@@Son_of_Adam_07 even if it’s his team doing all the research, the man knows how to break things down into simple digestible concepts. I think that’s genius!

[@khanacademy]

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)

[@thewolfeofrealest8]

you're still AWESOME!

[@hugopasqualdelpobil4224]

It’s okay

[@markkaminsky4943]

No worries, still the best video on this subject

[@derbygirle]

So it is essentially up to and including the 24th month?

[@jackpalen7292]

Gotta learn this quick before the economy collapses

[@zaynumar0]

Hahah

[@chrisgonzalez5455]

Um. Yep.

[@MattsPath]

This was prophetic.

[@leonardobassino3719]

man I hope you did considering the situation lol

[@cryp0g00n4]

did it really collapse or just shuffle. I think economic collapse basically means becoming a skeleton. That's not even physically possible. If a prisoner can trade saltine crackers in a jail cell for the top bunk, I'm sure we can figure out a way to do stuff with no government.

[@davidcliff2141]

Guess this is relevant again

[@JackCorsellis]

I'm doing videos showing the best place to be given current conditions. Would welcome your feedback David. JC

[@superagario9249]

Isn’t it something! We’ll never learn...unbelievable!

[@stuieblack]

More today

[@kevngu7256]

And again

[@shakaama]

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.

[@kevindebruyne17]

Crazy how this video was shot in March 2008 and a recession hit in the coming few months. I’m watching this in Jan 2023 and people are talking about an incoming recession this year. Only time will tell! Take care folks!

[@musak.4068]

Check the market today.

[@jasonaltice9920]

Finally! I got an explanation of how interest rates are determined. That seems to be the biggest key to understanding how inverted curves predict recessions. None of the other videos I have watched have included that bit. Thanks!

[@Gabby-it7nl]

Hi can u elaborate on that please

[@colleen.odegaard]

"The market and the risk assets in particular price for somewhat of a goldilocks, soft-landing type scenario, I do have about $300k amount of capital to start up but I have no idea what strategies and direction I need to approach to help me make decent returns

[@Shultz4334]

A solid strategy can be a key component of an investor’s portfolio. That way your investment is balanced and you don’t get to make so much losses.

[@DanLeahfort]

Speaking with an advisor helped me stay afloat in the market and grow my portfolio to about 65% since January, and in just a few months, I was able to earn over $350K in net profit They have strategies that are specifically suited to your long-term objectives and financial aspirations.

[@TeresaBrickle]

Amazing! Could shed more light or info on how you came along such world class expertise and how to possibly get across to this aforementioned individual?

[@DanLeahfort]

I’m a realtor, and my job doesn’t permit me the time to properly analyze my holdings/evaluate stocks myself, so I’ve had a fiduciary " *Monica Selena Park* " actively restructuring my portfolio now to match the present market condition and that’s how I’ve been able to stay afloat, knowing when to buy and sell…maybe you should do the same.

[@TeresaBrickle]

Thank you for this tip , I must say, Monica appears to be quite knowledgeable. After coming across her web page, I went through her resume and I must say, it was quite impressive. I reached out and scheduled a call

[@Bismarkdee-b9n]

I came across your channel through this video-case studies are incredibly valuable, and I'm eager to see more in the future! Building wealth involves establishing routines, like consistently setting aside funds at regular intervals for smart investments.

[@christiankurian9219]

Watching this for a quick overview on this for my MBA finance class. Then I notice this is from 2008. I'm like whoa. In the MBA classes, we always talk about 2008 like it's WW2 lol

[@veshalgohil8298]

Your videos are really very helpful to understand things in finance

[@Ofure127]

Khan, your tutors are so insightful. this really is a revolutionary achievement. Keep it up.

[@LeahElizabeth]

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.

[@danthemann6565]

Excellent demonstration of the yield curve. Thank you

[@PunmasterSTP]

Yield curve? More like "Yes, I'm glad I heard!" Thanks for sharing so much wonderful information on *so* many topics!

[@junyanyang982]

Me watching this 13 years later.

[@derbygirle]

This was a GREAT first look for me at this, thx! I look forward to looking through all your teachings:)

[@invasions]

Wonderful presentation. Many thanks for your time putting this together for us.

[@09ThunderOne]

Prepare for this video to get a lot more views

[@thestockmarketchannel8086]

Khan, are you going to make an updated video on the yield curve since it's now inverted here in the US?

[@esotericcommonsense6366]

Bro really made this before the great crash

[@fleshcookie]

"We're going to borrow a billion dollars from you because we can't control our spending" Sal cracks me up

[@indubitablesb]

Cleared the topic in just 15 min...thanks

[@Javssoccer]

8:08 to 9:27 (very useful for rate determination/pricing)

[@Distinguished-Gentleman]

Very well spoken and explained Thanks

[@Dopenyc1]

Very good I learned a lot thank you very much

[@cryp0g00n4]

This was a really good intro, thank you!

[@JustMe-ro1be]

Superb videos. Thank you

[@sriraghavanrajamannar4156]

very WELL explained - why the quality of the video at 240p understand this video is taken 15 years ago can we update the video

[@Jay-jq6bl]

When you have spreadsheets in your content, can you please have a higher resolution?

[@muditjain7667]

This is just before the recession(march 2008) and the 1-month, 3-month yield curve is starting to getting inverted!

[@joshuaasuquo6322]

Good teaching, good learning.

[@MominNz]

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?

[@tauriqabdullah6130]

when you explained why a treasury bond is risk free, I thought you were going to say that when the government has run out of money, all it needs to do is print more.

[@rajatrana2020]

Printing more money is ofcourse an option but kind of a "last resort". You wouldn't want your govt to print more money and bring down the value of the currency (Zimbabwe's Crisis). Increasing Tax Rate on the other hand keeps the supply of currency constant in the country, it just shifts it from one side (citizens) to the other (government)

[@m-p4256]

The government won't print money especially if they want inflation to keep down.

[@amitsingh-rv4hz]

Does the Yield Rate reveals the risk perception of the Bond Buyers ?

[@knoxkiernan6463]

Could be a good opportunity to discuss points of inflection.

[@HKHasty]

"dollar might collapse.." says it so casually

[@heigio123]

So if demand leads to spike in price, yield drop as coupon rate is fixed. That's why inverse relationship between price and yield.

[@gustavom8726]

You have it always so clear

[@subirdas0]

It’s a published post sell transaction metric. Buy back has related implications?

[@Aj.-]

thank you they are helpful to me as a trader

[@juancuelloespinosa]

8:00 nice underhanded jab 😏

[@mrjaywilliams7729]

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.

[@elieone]

thank you for all your videos, great stuff

[@ferrariscuderia4290]

Freudian slip at 07:50 lol!

[@naderaltammami8770]

Great video.At least gained something.Thanks

[@rramos7488]

thank you for the quick break down sir!

[@BrockJamesStory]

Yes we're screwed!!!

[@ShineForlyn777]

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!

[@PunmasterSTP]

Hey I know it's been years (and actually a decade), but I just came across your comment and I was curious. How did the rest of your education go, and how have things been going since then?

[@ShineForlyn777]

@@PunmasterSTP Hi Samter, wow yes a decade. Well I went on to complete a masters in clinical mental health in 2019. I still need to study for the NCE to become licensed, but having a very hard time focusing so it's been really slow for me.

[@PunmasterSTP]

@@ShineForlyn777 I see, and I wish you the best! It sounds like you are/you'd be doing very important work.

[@alyssag8828]

Love this 10 year response:)

[@drew2f]

Hi I'm from the future, 2021. Preparing for the next market crash.

[@Daffh099]

I love you voice :-) communication is very clear :-)

[@321ian]

Small nit pick, but I think Sal mixed up the terminology at 8:30. The market/product is essentially money/loans (to be used for government spending), and the currency are the treasuries. So the supply is the investors willing to loan their money, and the demand is the government who needs money to pay for things. It would be that a higher supply of investors lowers the yield of the treasury, not the demand.

[@musak.4068]

You overthought this, and as a result initially disagreed with him just to end by repeating what he said. Supply are the issued bonds. Demand are the investors who want to "purchase" those bonds. The reason the government CAN pay a lower rate when there are a lot of buyers (aka investors) is because there are a lot of buyers. The government isn't in a desperate position in that case. If there were less buyers, the government would have to raise rates to attract investors.

[@achempim2023]

awesome presentation .thx

[@shwetatawlare7452]

This is great.

[@alisheikh3585]

at 8:20, shouldn't it be depending on the supply rather than demand, as the investors are suppliers? And that also stands with the economic perspective, higher the supply, lower the rate and vice versa

[@deepsarkar3888]

Does the government/ fed calculate or take into consideration the time value of money while determining the yield?

[@kaneknight4606]

Government doesn't determine the yield, the market does.

[@eds550]

good one Mr Khan

[@Atlhas]

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?

[@kuikyroje]

Due to inverse relationship between Yield and Price of Bonds, I think

[@benwarnock]

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?

[@MasterHolmstrom]

Ben Zemła no

[@benrohr]

Guess this is relevant yet again.

[@danielrosen4496]

What happens if U took out a 20 year Federal Note ($1000) at say 10% and U decide U need Ur money back after 10 years. How much do U get back? Does the interest U get back change to a lower amount?

[@edwinbab705]

What's good to invest for gold is gold or gdx ok

[@shreyakabadi9469]

This videos was posted 12 years ago!!!

[@panghouavang4077]

Thanks

[@hotamtoy5287]

The vertical line Coupon payment or Yield to Maturity?

[@karenl3191]

Good job. If you ever rerecord this though, use the word "maturity" instead of "duration". Duration has a special meaning in the world of bonds (it's a measure of how much the price of the bond changes when interest rates change).

[@zaynumar0]

Much love sal

[@AkshayBhatnagar]

Wonderful!!

[@okanaybar]

please note that you should annualize the rates shorter than 1 year and then plot the graphic accordingly.

[@zakkarp674]

Are the points on the yield curve referring to the yield to maturity?

[@olipop84]

can yuo explain the iverted yield curve?

[@fredericp64]

super

[@andychu84]

wonderful!!!

[@habali08]

nice work, just please increase the video quality

[@rocnaymo]

it was done 11 years ago...

[@Questfortruth86]

Or they could print and inflate the money supply.

[@snois2]

A positive slope is bullish and negative slope is bearish right?

[@ghost-nq6px]

are they really still risk free when the govt is so far in debt and manages to run out of funding money all the time?

[@Nandine2]

Do you have any videos on Algebraic Long Division? could not find them in the algebra section. good video btw..

[@AZ-vw8gn]

1:09 they can print money*

[@lilgrey8363]

we can’t just print more money because of inflation.

[@NishantGogna]

What does it mean when the yield curve is flattening?

[@jesseglaser2721]

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.

[@nicholasblake1392]

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.

[@peters972]

8:38

[@vvpChannel3112]

what is bootstrapping sir ?

[@heigio123]

This is wrong. Govt sells at certain fixed coupon or interest rate. The change in price of bonds, bills- demand and supply- determine the yield of that instrument.

[@uartim]

2008.... before the tsunami

[@shortjohnsilver4605]

Guess what we're in for round 2 of, right about now

[@tsb7911]

One very slight faux pas. Khan said, "The government can raise taxes if it runs out of money." Raising taxes must be passed by both Houses of Congress and signed into law by the President. Not an easy task. The fed simply prints more money. That's an easy task for them.

[@musak.4068]

Both processes involve multiple individuals reaching an agreement...

[@KM-ff2gm]

240p, is this because KZbin reduce quality due to Covid?

[@Partizan-one]

Couldn't the fed pay back the bonds by printing money instead of raising taxes depending on the climate of the economy.

[@josef6999]

james panos That causes Hyperinflation which ruins economies. Suggest you look up hyperinflation

[@Partizan-one]

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.

[@nicog6188]

Yeah ...print more money....said no educated person ever

[@isaiahpaul3941]

They do! Look up Modern Monetary Theory.

[@NathanRyanAllen]

@@josef6999 lol they do print money. The US prints money to pay for things all of the time.

[@jakesorenson6152]

I think you'd like the new star wars movie.

[@Cinthiel]

You keep saying "risk-free" but I don't believe anything is risk-free. What if the USD tanks? Doesn't that mean those bonds are worth significantly less or am I misunderstanding something?

[@zd1322]

Why hasn't this video been demonetized yet? It is explaining elements of capitalism and capitalism is bad! Right comrades???

[@nicoqueijo]

1:05 That's so messed up XD Stay classy uncle Sam...

[@tonyg3556]

It’s all the same math

[@adampaxton5214]

nice video but what a crap plot lol XD

[@user-ql2ik8qz1f]

سکسس

[@raccoon874]

*oh yay 240p..*

[@zhenwang7380]

8:30