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What does the term structure of interest rates indicate?

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June 11, 2010 7:56AM

The term structure of interest rates is often referred to as a yield curve. It shows the relative level of short-term and long-term interest rates at a point in time. Knowledge of changing interest rates and interest rate theory is extremely valuable to corporate executives making decisions about how to time and structure their borrowing between short- and long-term debts.

the yield curve indicates the movements of interest rates. For example, a downward curve indicates that the interest rate will fall in the future. these signals help firms to manage their debt structure.