Glossary

Yield curve

The yield curve represents the relationship between the maturities of bonds traded on the market and their yield to maturity. The yield curve is basically divided into three segments: a short end, a long end and a middle segment (for UBS bond funds, this corresponds to maturities of 1 to 3 years for Short-Term Bond Funds, over 5 years for Bond Funds and 3 to 5 years for Medium-Term Bond Funds). The shape of this curve allows conclusions to be drawn regarding the current state of the bond market. Normally, the curve rises for longer maturities: the investor enjoys higher returns as a result of investing his money over the longer term. If the yields in the shorter-dated segment are higher than at the long end, this is called an inverse yield curve.The fund manager controls the interest-rate risk of the fund according to the positioning of his portfolio on the yield curve. See duration.