• Construct the current government bond spot curve over 30 years. Be sure to use yields stated on a semiannual bond basis.
• Interpolate between the yields for a four-year and six-year bond.
  • State whether this current spot curve is normal, inverted, flat, or if it has an unusual shape (inverted at some points, but not others). Insert your graph into the paper for reference.
  • Discuss the meaning behind the shape of the current yield curve.
• Compute the ten- to two-year yield spread and the ten-year to three-month yield spread.
  • Gather data or a source on one of these yield spreads, and plot this on a line chart, from at least the year 1980 to the present day.
• Determine the implied one-year forward rates for each data point on your spot curve. Please show calculations.
  • Plot the forward curve on the same graph as the spot curve. Insert this new graph into the paper.
• Select three articles describing the connection between an inverted yield curve and recessions in the U.S with commentary on the current yield curve, and what this means for the possibility of a recession in the near future. At least one article must have a contrasting view on the possibility of a recession.
  • Compare the three articles, and carefully explain the contrasting viewpoint with respect to the possibility of a recession in the near future.
  • Based on your data and your review of the articles, state your opinion on the possibility of a recession.
  • Support your claim with facts.

Answer rating: 100% (QA)

To construct a government bond spot curve over 30 years you would typically need the yields of gover... View the full answer