Material Detail

This case quantifies the interest rate swap spread, as reflected on the 10-year Treasury bond yields, over time. This activity can be used as either (a) an instructor-led example in which the instructor shows –either on paper or a screen– the data and students analyze them, or (b) as a student exploration in which students find the specified data. Instructors with less time could use option (a) and instructors interested in their students learning about the FRED database could use option (b).This activity plots the interest rate paid by the fixed-rate payer on an interest rate swap transaction (e.g. the 10-Year Swap Rate), the yield on the matching Treasury bond (e.g. the 10-Year Treasury Constant Maturity Rate), and computes the difference between the two of them. This difference is an approximation of the swap rate and it displays both a secular trend and cyclical behavior.

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