GRAPHING YIELD CURVES

[referred to in the text in Problem 7.7]

The following are fictious data on yields to maturity. We will construct the yield curve for May 2005.

1-year 2-year 3-year 5-year 7-year 10-year

3-month
Constant Constant Constant Constant Constant Constant
Constant
Maturity Maturity Maturity Maturity Maturity Maturity
Maturity
Month Treasury Treasury Treasury Treasury Treasury Treasury
Treasury
Bond Bond Bondl Bond Bond Bond
Bill Rate
Rate Rate Rate Rate Rate Rate
(percent)
(percent) (percent) (percent) (percent) (percent) (percent)

2005:01 1.2 1.4 1.7 2.0 2.3 2.5 2.6

2005:02 1.2 1.6 1.8 2.1 2.4 2.5 2.7
2005:03 1.3 1.6 1.9 2.3 2.5 2.6 2.7
2005:04 1.6 1.8 2.1 2.4 2.6 2.7 2.8
2005:05 1.5 1.9 2.1 2.4 2.6 2.7 2.8
2005:06 1.4 1.9 2.2 2.4 2.6 2.7 2.8
2005:07 1.6 2.0 2.3 2.5 2.7 2.8 2.9
2005:08 1.9 2.4 2.5 2.7 2.9 2.9 3.0
2005:09 2.1 2.4 2.5 2.7 2.9 2.9 3.0
2005:10 2.2 2.4 2.5 2.6 2.8 2.8 2.9
2005:11 2.2 2.5 2.6 2.7 2.8 2.9 2.9
2005:12 2.5 2.7 2.8 2.9 2.9 2.9 3.0
2006:01 2.4 2.6 2.7 2.8 2.8 2.9 2.9
2006:02 2.3 2.5 2.6 2.7 2.7 2.8 2.8
2006:03 2.3 2.6 2.8 2.9 2.9 2.9 3.0
2006:04 2.6 2.9 3.1 3.2 3.2 3.2 3.2

The x-axis of the chart should reflect the time to maturity as indicated in the headings to the columns:

time to maturity 0.25 1 2 3 5 7 10

yield to maturity 1.5 1.9 2.1 2.4 2.6 2.7 2.8

A Yield Curve
3.0
2.8
2.6
y
 A Yield Curve
3.0
2.8
2.6
2.4

Yield to Maturity
2.2
2.0
1.8
1.6
1.4
1.2
1.0
0 1 2 3 4 5 6 7 8 9
Time to Maturity

The same chart can be produced as below without cutting and pasting by highlighting the data directly a
To see the difference for each chart click on the chart and then click on the menu CHART, SOURCE DAT
at the data ranges for each axis on the SERIES tab.
Note: the Excel default is to treat the uppermost data series as the X-axis for a scatterplot. Be careful.
chart has its axes reversed, click on the chart and then on the menu CHART, SOURCE DATA, SE
then change the row numbers (and possibly column numbers) to make sure that correct data are a
each axis.

A Yield Curve
3.0
2.8
2.6
2.4
Yield to Maturity

2.2
2.0
1.8
1.6
1.4
1.2
1.0
0 1 2 3 4 5 6 7 8 9
Time to Maturity
Note: the time units are years, so that 3-months is 0.25 years.

The easiest way to produce a properly formatted chart is to cut and paste the correct values for each
time to maturity below the times to maturity data. Here the data are copied from Row 20, Columns B-H
Then highlight the data (B35:H36) and INSERT, CHART, SCATTER, option (in this case) SMOOTH
7 8 9 10

lighting the data directly as in Row 20.

nu CHART, SOURCE DATA and look

a scatterplot. Be careful. If your

ART, SOURCE DATA, SERIES tab;
sure that correct data are assigned to

7 8 9 10