Which of the following indicates a high expectation of future interest rates?

An upward sloping yield curve indicates a high expectation of future interest rates because it reflects the market's anticipation that rates will rise over time. When investors see longer-term securities offering higher yields compared to short-term securities, it suggests they expect inflation or economic growth in the future, leading to higher interest rates. This expectation is typically rooted in the relationship between risk and time; as the holding period increases, investors demand compensation for greater risk, which is manifested in higher yields for long-term bonds.

The upward slope can also be interpreted as an incentive for investors to lock in rates before they potentially increase, further validating the belief that economic conditions will improve or inflation will rise, prompting the central banks to tighten monetary policy. Thus, the upward slope of the yield curve becomes a reflection of broader economic expectations, indicating confidence in growth and higher rates ahead.