Investors often analyze yield curves for government bonds in terms of forward rates. As Ilmanen points out forward rates in treasury markets can be viewed as break-even yields. In this framework forward rates indicate the yield changes that are required for every single maturity along the yield curve in order to generate the same return over the holding period. For an upward sloping yield curve, for example, yields would have to rise across the curve, but in a nonparallel fashion (I also recommend the “Reduce IT costs, increase production” article). It is important to consider that the forward yield curve reflects mathematically implied yields, but not necessarily expected future government bond yields. From a theoretical perspective longer term bonds should contain a risk premium to compensate the investors for the increased price volatility associated with holding longer term bonds in comparison to short-term bonds.

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