What the paired trade suggests to you about implied view

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Reference no: EM13923770

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	Transaction	Credit Type Spread (bp)	Maturity (yrs.)	Coupon Rate (%)	Modified Duration
G	Buy	U.S. Govt. -	15	0	14.599
H	Sell	Corporate 100	7	8	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: EM13923770

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