Question

Examine yield curve shapes using daily yield curve rates provided by U.S. department of treasury .

a) Report treasure yield rates (1 month, 3 month, 6 month, 1 year, 2 year, 3 year, 5 year, 7 year, 10 year, 20 year, 30 year) on Jan. 02, 2014, Jan. 02, 2015, Jan. 04, 2016, Jan. 03, 2017, Jan. 02, 2018, Jan. 02, 2019, and Sep. 02, 2019.

b) Compute each term spreads for seven term structures.

c) Plot seven yield curves that show the relation between yields and maturities.

d) Provide your findings thoroughly from b) and c).

Answer 1

A) Report Treasury yield rates?

Date	1 Mo	3 Mo	6 Mo	1 Yr	2 Yr	3 Yr	5 Yr	7 Yr	10 Yr	20 Yr	30 Yr
1/2/2014	0.01	0.07	0.09	0.13	0.39	0.76	1.72	2.41	3	3.68	3.92
1/2/2015	0.02	0.02	0.11	0.25	0.66	1.07	1.61	1.92	2.12	2.41	2.69
1/4/2016	0.17	0.22	0.49	0.61	1.02	1.31	1.73	2.06	2.24	2.64	2.98
1/3/2017	0.52	0.53	0.65	0.89	1.22	1.5	1.94	2.26	2.45	2.78	3.04
1/2/2018	1.29	1.44	1.61	1.83	1.92	2.01	2.25	2.38	2.46	2.64	2.81
1/2/2019	2.4	2.42	2.51	2.6	2.5	2.47	2.49	2.56	2.66	2.83	2.97
9/3/2019	2.06	1.98	1.88	1.72	1.47	1.38	1.35	1.42	1.47	1.77	1.95

Yield Curve for the Seven term structure

There are basically three types of yield curves

1. Normal Yield Curve
2. Inverted Yield Curve
3. Flat Yield Curve

Normal Yield Curve:- a normal yield curve is basically upward sloping (best example for upward sloping will be 02 jan 2014's yield curve). It signifies that yield on longer terms bond will continue to rise which is good for the economy.

Inverted Yield Curve:- in this type of yield curve, yield on longer term may continues to fall. It may signifies the economic recession. for 3rd sept 2019 we can see this trend for a while, anyway it again regained it course upward.

Flat Yield Curve:- Flat yield curve signifies the change in the economic scenario from recession to groth or from growth to recession. this treand can be seen in 02 jan 2019.

Yield Curve LO Yield +1/2/2014 +1/2/2015 +1/4/2016 *-1/3/2017 * 1/2/2018 1/2/2019 +-9/3/2019 N = 1 Mo 3 Mo 6 Mo 1 Yr 10 Yr 20 Yr 30 Yr Maturity