<p>There is the <a href="https://www.investopedia.com/terms/m/market-segmentation-theory.asp" rel="nofollow noreferrer">market segmentation theory</a>. </p>

<p>The demand on the longer end of the yield curve in theory comes from institutional investors, pension funds, insurance companies, foreign central banks etc. who prefer longer durations.</p>

CC BY-SA 4.0
2018-05-19T14:12:41.303Z
2018-05-19T14:12:41.303Z
jaamor
<p>There is convexity, where holding longer bonds is inherently more valuable in the context of volatility.</p>

CC BY-SA 4.0
2018-05-20T20:34:55.140Z
2018-05-20T20:34:55.140Z
Attack68
<p>I find the yield curve for bond rates confusing. For example, the current yield curve for US treasuries is shown below:</p>

<p><a href="https://i.sstatic.net/TQ8Lk.png" rel="noreferrer"><img src="https://i.sstatic.net/TQ8Lk.png" alt="enter image description here"></a></p>

<p>The difference between the 10-year bond and the 30-year bond is tiny, just 0.15%. This seems like a negligible premium to receive for assuming an additional 20 years of risk.</p>

<p>Is there a theory that explains this counterintuitive (to me) condition?</p>

<financial-economics><bonds>
Why does the yield curve flatten?
Lassie Fair
# Why does the yield curve flatten?

(Asked by: username_0 on 2018-05-18)

I find the yield curve for bond rates confusing. For example, the current yield curve for US treasuries is shown below:

[![enter image description here](https://i.sstatic.net/TQ8Lk.png)](https://i.sstatic.net/TQ8Lk.png)

The difference between the 10-year bond and the 30-year bond is tiny, just 0.15%. This seems like a negligible premium to receive for assuming an additional 20 years of risk.

Is there a theory that explains this counterintuitive (to me) condition?

**Tags:** financial-economics, bonds

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## 2 answers

### Answer by username_1 on 2018-05-19. Score: 1

There is the [market segmentation theory](https://www.investopedia.com/terms/m/market-segmentation-theory.asp).

The demand on the longer end of the yield curve in theory comes from institutional investors, pension funds, insurance companies, foreign central banks etc. who prefer longer durations.


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### Answer by username_2 on 2018-05-20. Score: 0

There is convexity, where holding longer bonds is inherently more valuable in the context of volatility.


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