What paired trade suggests to you about manager implied view

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Question: The par yield curve for U.S. Treasury bonds is currently flat across all maturities at 5.50 percent. You have observed following "paired" transaction by your bond portfolio manager:

Bond G

Transaction Buy

Sell Type

U.S. Govt. Corporate

Credit Spread (bp)

- 100

Maturity (yrs)

15 7

Coupon Rate (%)

0% 8

Modified Duration

14.599 5.386

Briefly discuss what this paired trade suggests to you about the manager's implied view as to (1) the general direction of future interest rate movement, (2) the future shape of the par yield curve, and (3) the future level of corporate bond credit spreads.

Reference no: EM132758367

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