what is the yield curve risk 
the yield curve risk is the risk of experiencing an adverse shift in market interest rates associated with investing in a fixed income instrument when market yields change this will impact the price of a fixed income instrument when market interest rates or yields increase the price of a bond will decrease and vice versa understanding yield curve riskinvestors pay close attention to the yield curve as it provides an indication of where short term interest rates and economic growth are headed in the future the yield curve is a graphical illustration of the relationship between interest rates and bond yields of various maturities ranging from 3 month treasury bills to 30 year treasury bonds the graph is plotted with the y axis depicting interest rates and the x axis showing the increasing time durations since short term bonds typically have lower yields than longer term bonds the curve slopes upwards from the bottom left to the right this is a normal or positive yield curve interest rates and bond prices have an inverse relationship in which prices decrease when interest rates increase and vice versa therefore when interest rates change the yield curve will shift representing a risk known as the yield curve risk to a bond investor the yield curve risk is associated with either a flattening or steepening of the yield curve which is a result of changing yields among comparable bonds with different maturities when the yield curve shifts the price of the bond which was initially priced based on the initial yield curve will change in price special considerationsany investor holding interest rate bearing securities is exposed to yield curve risk to hedge against this risk investors can build portfolios with the expectation that if interest rates change their portfolios will react in a certain way since changes in the yield curve are based on bond risk premiums and expectations of future interest rates an investor that is able to predict shifts in the yield curve will be able to benefit from corresponding changes in bond prices in addition short term investors can take advantage of yield curve shifts by purchasing either of two exchange traded products etps the ipath us treasury flattener etn flat and the ipath us treasury steepener etn stpp types of yield curve risk