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
Modern / Discounting Cash Flow Techniques : These methods generally are of more use to businesses in their investment decisions. They take into account the time value of money and

Net Present Value (NPV) In corporate finance, the current value (the value of cash to be received in the future expressed in today's dollars) of an investment in excess of the

Timing of Financial Reports: Just as the actual report requirements differ depending on the requirements of the stakeholder that will be using them, so too will the timing of t

Nick Leeson and Barings Leeson was the trader who managed to bring about the collapse of Barings Bank in 1995. The main reason he was able to do this was because there was a ce

Q. Estimation of Working Capital? A firm must estimate in advance as to how much net working capital will be required for the smooth operations of the business. Only then, it c

Read the journal article Lafferty, B. A., & Hult, G. T. M. (2001) ‘A synthesis of contemporary market orientation perspectives’, European Journal of Marketing, 35 (1/2), pp. 92–109

Why do you think the host country tends to resist cross-border acquisitions, rather as compared to green field investments? Answer: The host country is inclined to view green f

what is the applicability of the operating cycle in a vegetaion farm in Uganda

Part B This case is intended to be an introduction to the various methods used in capital budgeting and looks at some of the decisions that may have to be made when evaluating pro

Liquidity risk tends to change as and when there exists a change in the spread between the bid and the ask price. Market liquidity change is a matter of concern f