Compare and contrast two yield curves

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1. Compare and Contrast two yield curves.

Plot a recent nominal constant maturity US Treasury yield curve (from the US Treasury website) and compare it to the one prior to the election result of Donald Trump.

On the same graph, for as many data points as possible, estimate in basis points the amount the yield curve rose due to a change in inflationary expectations (use a stacked line chart to shade this increase onto your plot). Also include an estimate for the real interest rate change. (Also shade the area that was due to a change in 'real' interest rate expectations in a different color). Use the TIPS yield curve from the Treasury Website to estimate the change in inflationary vs real interest rates expectations.

(Plot both yield curves on the same graph, use different lines and spend some time making it look clear and pretty. If you can't shade the graph in excel, then shade it on your print out. Put the estimates for change in real and change in inflationary expectations on the graph somewhere).

2. From your last yield curve estimate a liquidity premium at the 5 year mark, to help estimate where you think the 3 months rate (or Fed Funds Rate) will be in 5 years time. Forward guidance on the Fed Funds rate is offered on the Fed's website.

3. Attach newspaper article(s) with your printed graph to hand in, that help explain/justify why expectations for future short term interest rates, long term interest rates, and inflationary expectations changed so dramatically.

Reference no: EM131294807

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