An upward sloping yield curve is referred to as what type of yield curve?

An upward sloping yield curve is termed a normal yield curve because it reflects the typical relationship between bond yields and maturities. In a normal yield curve, longer-term bonds have higher yields compared to shorter-term bonds, which is generally due to the risks associated with time, such as inflation and uncertainty about future interest rates. Investors typically demand a higher return for commitments that extend further into the future to compensate for these risks.

Additionally, a normal yield curve often indicates a healthy, growing economy where investors expect stronger growth and potentially rising interest rates in the future, leading them to require higher yields for longer maturities. Understanding the dynamics of a normal yield curve plays a critical role in treasury and investment management, as it helps in making informed decisions about fixed-income investments and interest rate expectations.