Introduction: Interest rates on financial instruments (for example, bonds) can and do change. The reasons for the changes are complex, but it really boils down to supply and demand. If there are many sellers of bonds and not many buyers, the buyers would have to be induced to buy by offering them higher yields. On the other hand, if there were many buyers and few sellers, buyers would be willing to accept lower yields just to get their bonds.In this assignment, you will gather data on US Treasury bond yields, and attempt to explain changes in them.
instructions: Go to the Federal Reserve Bank of St. Louis’ web site, http://www.stlouisfed.org. Click on Research & Data on the top menu, and then scroll and click on the Economic Data – FRED link. Next click on Category on the browse data row. Then click on interest rates under the Money, Banking, Finance section. Next click on Treasury Constant maturity. Check the Monthly box under 10-Year Treasury Constant Maturity Rate (Percent, Not Seasonally Adjusted). Then click add to graph. Once you are on the chart click the 10Y to the left of the date range area.You now have the yield chart for the last 10 years for the 10-Year US Treasury Bonds. As we discussed in class this is a good representation on the general level of interest rates within the US economy. Print the chart.
Questions1. The chart you just printed shows movements in the Treasury bond interest rate over time. What is the general trend in interest rates over the ten-year period?
2. Over what period did interest rates decrease the longest? Over what period did they increase the longest?
3. Give as many specific reasons as you can for what you feel drove the increases and decreases in interest rates that occurred in the periods you selected. Discuss the interest rate climate for the last 12 months and why you feel rates are at these levels?
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