Spot interest rate is the ratio of the interest income indicated on the face of the bond or the discounted income obtained when buying the bond to the current price of the bond. Yield to maturity is an interest-free security at a given point in time. When bondholders buy interest-bearing bonds issued by the government, they can get the principal and interest in one lump sum, and the ratio of one-time income to principal is the spot interest rate.

Forward interest rate is the interest rate level implied by a given spot interest rate from a certain point in the future to another point in time. After determining the yield curve, all forward interest rates can be obtained according to the spot interest rate on the yield curve, and the forward interest rate is closely related to the yield curve.

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The difference between spot interest rate and forward interest rate is that the starting point of value date is different. The starting point of spot interest rate is the current moment, while the starting point of forward interest rate is some time in the future. For example, the current time is September 5, 2005. On this day, the yield of several bond varieties with different remaining maturities in the bond market is the spot interest rate.

At present, the reason why the yield of bonds maturing in two years is different from that of bonds maturing in 1 year is mainly because investors think that the yield in the second year will change compared with 1 year.

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