The Yield Curve

Go to www.smartmoney.com. Access the Living Yield Curve (look for the Economy and Bonds tab), a moving picture of the yield curve. Is the yield curve usually upward or downward sloping? What about today's yield curve? How much does the slope of the curve vary? Which varies more: short-term or long-term rates? Can you explain why this might be the case?

Real and Nominal Yield Curves

The U.S. Treasury releases yields for several points along the yield curve on its web site. You can check it out at www.treas.gov/offices/domestic-finance/debt-management/interest-rate/yield.shtml. Look for links to both the nominal yield curve (the yield curve on "regular" bonds for which the dollar payments are fixed in advance), as well as the yield curve derived from inflation-indexed Treasury bonds, or TIPS. What inflation forecast seems to be consistent with the 5-year bonds? What about the 20-year bonds? Are there reasons besides expectations that yields on indexed and nominal bonds might differ? Compare the slopes of the real and the nominal yield curves. Why might they differ?