From FRED Economic Data, download the monthly treasury yields.

a) Display term spread (slope of the yield curve) from the 1960s to now using 3-month and 10- year maturities at a monthly frequency.

b) On the same graph, display the NBER recession dates.

 c) On the same graph, identify periods during which the term spread becomes negative. 

d) Were these episodes followed by recessions within a year? If so, how many times?

 e) Was there any NBER recession that was not preceded by the negative yield curve slope? 

f) Is the term structure of interest rates a useful business cycle indicator? Why or why not? 

g) If the predictability of the slope of the term structure deteriorates, what could be the main reason?

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a To display the term spread slope of the yield curve from the 1960s to now using 3month and 10year ... View the full answer