Open Yale CoursesECON 252: Financial MarketsLecture 10 - Debt Markets: Term Structure<< previous session| next session >>Overview:The markets for debt, both public and private far exceed the entire stock market in value and importance. TheU.S. Treasury issues debt of various maturities through auctions, which are open only to authorized buyers.Corporations issue debt with investment banks as intermediaries. The interest rates are not set by theTreasury, the corporations or the investment bankers, but are determined by the market, reflecting economicforces about which there are a number of theories. The real and nominal rates and the coupons of a bonddetermine its price in the market. The term structure, which is the plot of yield-to-maturity against time-to-maturity indicates the value of time for points in the future. Forward rates are the future spot rates that can be
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