Market, inverted (backwardation)

Long-term fixed rate securities generally have a higher yield than short-term securities. However, if demand for short-term securities is very strong, their yield may rise above that of long-term securities. In Germany, this was occasionally the case during reunification in 1990, because the government and companies had a high short-term need for capital for upcoming investments. – In the commodity futures market, deliveries in the nearer months trade at a higher price than contracts maturing further away (a futures market in which the nearer months are selling at prices higher than the more distant months). This is mainly due to a temporary shortage of supply or corresponding expectations of market participants. – See backwardation, contango, option, interest rate structure, inverse.

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
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