Long-term bonds typically have lower yields compared to short-term bonds due to a few factors. One reason is that long-term bonds carry a higher risk of interest rate fluctuations over time. Investors require compensation for taking on this risk, so they demand higher yields for long-term bonds. Additionally, inflation expectations play a role. If investors anticipate higher inflation in the future, they will demand higher yields on long-term bonds to protect the purchasing power of their investments. Finally, the supply and demand dynamics of the bond market can also influence yields. When there is a higher demand for long-term bonds, their prices increase, leading to lower yields.
