The object of this paper is to discuss the main principles underlying the pattern of interest rates on government securities in this country. It does not attempt to examine the place in the yield structure of those stocks which may possess special characteristics of term or provision for repayment, etc.; and because of its concentration on general principles the complex effects of taxation have been relegated to the background. The subject is approached by the following stages:

(1) The pattern in the hypothetical case of complete certainty.

(2) The idea of a ‘normal’ pattern, i.e. in conditions of complete uncertainty.

(3) The changing pattern in conditions of varied and fluid expectations.