Historical look at the treasury yield curve, Financial Management

The minimum interest rate which investors demand for non-treasury securities is represented by the yield offered on the treasury securities. This is why market participants monitor the treasury securities, especially the yield of on-the-run issues, on a continuous basis. Now, let us look into the relationship between the yield offered on on-the-run treasury securities and maturity.

 Shape of the Yield Curve

Historically, three types of yield curve shapes have been observed. The first is normal or positively sloped yield curve (figure 1). This is a yield curve in which an investor is rewarded with a higher yield for holding longer maturity Treasuries. The second type of curve is known as a flat yield curve(figure 2). In a flat yield curve, the yield doesn't vary with the maturity, i.e., it remains same for all maturities. The third and last type is inverted or negative sloped yield curve in which the longer the maturity the lower is the yield(figure 3).

Figure 1

125_shape of yield curve.png

Figure 2

1371_shape of yield curve1.png

Figure 3

1907_shape of yield curve2.png

Posted Date: 9/10/2012 3:20:03 AM | Location : United States







Related Discussions:- Historical look at the treasury yield curve, Assignment Help, Ask Question on Historical look at the treasury yield curve, Get Answer, Expert's Help, Historical look at the treasury yield curve Discussions

Write discussion on Historical look at the treasury yield curve
Your posts are moderated
Related Questions
Q. What are the needs for financial statement analysis? The financial statements are to be studies for the following purposes. a) To make comparisons between two sets of fin

1. Of course a swaption will be needed. The major reasons being that Bond A is callable after 3 years and matures in 4 years whereas Bond B matures in 5 years. It is understandable

Benjamin Tang currently has holdings in the following three companies:                                                                             E(R)                      σ

Q. Allocation head for Revenue Expenditure? All revenue expenditure is recorded in revenue allocation registers by various heads of accounts classification, The expenditure on

Q. Example on hedge fund? Hedge Fund enters agreement to sell HK$ in six month's. At expiration the Hedge Fund requires to buy spot HKD and deliver these against the short futu

Differences between IAS 14 and IFRS 8 IFRS 8 requires identification of operating segments based on internal reports which are regularly reviewed by management for decision

Two years ago, Randburg Ltd needed to accumulate a total of R250000 by the end of 5 years to acquire new imported machinery. To do so Randburg Ltd makes quarterly-annual deposits i

The Rise of Derivative Market: In the 1980s, the process of liberalization and deregulation of the financial markets gained momentum when the British and American leadership l

What are the benefits of "collecting early" and how do companies attempt to do this? A fund has time value.The sooner money is collected the better.  Companies utilize regional

Explain how a country can run an overall balance of payments deficit or surplus. Answer:  A country can run a whole BOP (balance of payments) deficit or surplus by engaging in th