4. This problem studies the relationship between the US Treasury yield curve and the US...
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4. This problem studies the relationship between the US Treasury yield curve and the US Treasury Inflation Protected (TIPS) yield curve as discussed in class. Steps:
Login into Bloomberg Terminal. When the cursor is in the upper left corner type: GC I169 and then hit go/enter. Ensure the following are selected: X-Axis has "Tenor", Currency has "None", PCS has "BGN",
Specific has "MM/DD/YY" and Relative has "Last". In the highlighted "Add Curve" box put the cursor there and type:GC I25 and then hit go/
enter. In the highlighted "Base Curve" box ensure that "I169 Mid YTD" is selected. In the highlighted "Lower Chart" box (upper right corner of the page) ensure that "Spread
Chart" is selected. Study the three curves and note X-axis for each and the Y-axis tenor.
Answer the following questions: a. Please note the X-axis for the TIPs curve is scaled with negative numbers. Why do you think that is the case ?
b. What does the Spread Chart represent ? What is the slope of this curve ? (Please be detailed in answers to these questions.)
c. Bonus Question (not required for HW completion). What do you think the historical shape of the above Spread Curve has been and why it may be different from today ?
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