Question

If you could predict with certainty the shift in the yield curve how would you position...

If you could predict with certainty the shift in the yield curve how would you position your all US Treasury fixed income portfolio.

a. An inverted yield curve

b. A “humped” yield curve

c. An upward slope yield curve

Explain why.

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Answer #1

option (c) i.e. an upward sloping yield curve is the correct answer.

The current US Treasury market is positively(upward) sloped because with extending maturities on securities the yields are also rising.

For example, the yield on the 2 year Treasury is 0.65%, while the yield on the 10year and 30year Treasuries are 2.11% and 2.70% respectively.

Thus, based on above explanation and example, we can conclude that the yield curve is positively sloped.

Incase of any doubt, please comment below. i would be happy to help.

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