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Theories of the term structure

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Reference no: EM133062356

Treasury securities and term structure of interest rates. You will need data on US treasuries, which you can download from www.Quandl.com (if you do not have an account you can sign up for free). Search for "US Treasury Zero-Coupon Yield Curve" and select US Treasury Zero-Coupon Yield Curve. Download data for all maturities (1 to 30 years) for both September 30, 2018, and September 30, 2021. (Select table and monthly before downloading.)

1. Provide a few economic arguments for the shape of the yield curve (hint: theories of the term structure)

2. Plot the two yield curves using all maturities (present the results in one plot). Comment on the differences between the two yield curves.

3. Use the data for September 2018 to estimate the forward yield-to-maturity on a 2-year bond as of September 2021 and compare your estimate with the actual yield on a 2-year bond observed in September 2021. Did the market expect the change in the 2-year zero yield?

Reference no: EM133062356

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