ABSTRACT
The sources of debt securities’ supply and demand are well understood. It can be explained using elementary mathematics as to how the marketplace prices bonds once a discount is determined. Empirical research reveals as to how lenders formulate their interest-yield discount-rate demands. The yield curve illustrates and explains this marketplace, but the yield curve is dynamic. It moves because of changing human behavior, but not mechanically. While the yield curve becomes a basis of economic prediction, the yield curve is not a determinant of the economic future.
