The segmented markets theory explains upward-sloping yield curves as resulting from the demand for long-term bonds being high explains upward-sloping yield curves as resulting from the demand for long-term bonds being low explains upward-sloping yield curves as resulting from the favorable tax treatment of long-term bonds is unable to account for upward-sloping yield curves. The expectations theory suggests that the yield curve should usually be upward-sloping. the yield curve should usually be downward-sloping. the slope of the yield curve depends on the expected future path of short-term rates the slope of the yield curve reflects the risk premium incorporated into the yields on long-term bonds According to the preferred habitat theory, a steep yield curve may be an indicator of expectations of a significant increase in inflation an upcoming recession an economic slowdown lower future short-term interest rates