Yield curve. final

8/7/2019 Yield curve. final

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YIELD CURVE ANALYSIS


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EFINATION & INTRODUCTION:

A yield curve is a line that plots the interest rates, at a set point in

time, of bonds having equal credit quality, but differing maturity

dates.


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TYPES OF YIELD CURVES:

Flat Yield Curve

Inverted Yield Curve

Normal Yield Curve

Realized Yield curve

Treasury yield curve

Libor Yield Curve


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.Flat Yield Curve:

yield curve in which there is little difference between short-term and long-term

ates for bonds of the same credit quality. This type of yield curve is often seen during

ransitions between normal and inverted curves.


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n interest rate environment in which long-term debt instruments have a lower yield

an short-term debt instruments of the same credit quality. This type of yield curve is

e rarest of the three main curve types and is considered to be a predictor of

conomic recession.

.Inverted Yield Curve:


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3.Normal Yield Curve:yield curve in which short-term debt instruments have a lower yield than long-term

ebt instruments of the same credit quality. This gives the yield curve an upward slope.

his is the most often seen yield curve shape. Sometimes referred to as "positive yield

rve".


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.Realized Yield curve:

he actual amount of return earned on a security investment over a period of time.

his period of time is typically the holding period which may differ from the expected

ield at maturity. The realized yield also includes the returns that have been earned

rom reinvested interest, dividends and other cash distributions.


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5.Treasury yield curve:

graphical representation of the relationship between the differentaturities of Treasury securities and their yield to maturity


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.Libor Yield Curve:

he LIBOR yield curve plots interest rates for a range of maturities (from overnight tone year). LIBOR yield curve is typically a little higher than government curves and is

idely used in the financial markets.


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OTHER CONSTITUENTS:

Curve Steepener Trade

Yield Elbow

Yield Curve Risk

The Term Structure of Interest Rates and

the Yield Curve


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2.Yield Elbow :

The point on the yield curve indicating the year in which the

economy's highest interest rates occur.


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3.Yield Curve Risk:

he risk of experiencing an adverse shift in market interest ratesssociated with investing in a fixed income instrument. The risk is

ssociated with either a flattening or steepening of the yield curve,

hich is a result of changing yields among comparable bonds

ith different maturities


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.The Term Structure of Interest Rates

nd the Yield Curvehe term structure of interest rates refers to the graph of STRIP yields versus the

aturity of the STRIPS; sometimes this also referred to as the spot yield curve and

TRIPS rates are referred to as spot rates.


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What does yield curve predict?Yield curve predictions about future growth come in two general

flavors. One tries to predict the rate of growth that can be expected at

some point in the future, the other tries to predict the probability of a

recession occurring. It predicts about the economic indicators like GDP

growth, recession and inflation.


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1.Predictions on GDP:


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2.Predictions on recession:


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3.Predictions on inflation:


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Aadhish Pathare- 216Gavin Lobo- 213

Sanat Verma- 226

Ketan Makwana- 228

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Yield curve. final