Question

Case

View the following interest rates for the end of year 2000 and 2019. Analyze and explain the differences or similarities that you see.

Year                3-month T-bill Yield     10-Yr T-Bond Yield     30-Year T-Bond Yield

1999                        4.78%                           5.65%                            5.87%

2019                         1.86%                           2.98%                         3.13%

Answer 1

5.87 5.65 4.78 2.98 3.13 1.86 3-Month T-bill yield 10 Yr T-Bond Yield 30 Year T Bond Yield — 1999 2019

The bond yield for 1999 shows that expected return from the bonds during that period was much higher hence the bond yield is steeper than the bond yield of 2019. The expected yield from bonds in 2019 has fallen significantly down than what was in 1999. Both the yield curves are steep meaning that with the rise in maturity of the bond the yield rate rises in both the scenario. There has been significant fall in the yield from bonds in short term period, like for 3-month treasury bill yield. 3-Month T-bill yield 10 Yr T-Bond Yield 30 Year T Bond Yield 1999 4.78 5.65 5.87 2019 Difference 1.86 2.92 2.98 2.67 2.74 3.13