 Personal finance practice problem using OneNote. Yield curve creation. Prepare to get financially fit by practicing personal finance. You're not required to, but if you have access to OneNote, would like to follow along. We're in the icon left-hand side, practice problems tab and the 11140 yield curve tab. Also, take a look at the immersive reader tool, the practice problems typically in the text area too with the same name, same number, but with transcripts. It can be translated into multiple languages, either listened to or read in them. The yield curve can be something useful for investment strategies, and it's often one of the major tools that people look at to get an idea or to predict what's gonna happen in the future with regards to the market. Here, we're gonna be focusing in on where to get the data for the yield curve and how to graph the yield curve. We do do this in Excel. It's a great tool to kind of build your table, pull some data in from a website, and then work on the charts down here for our yield curves, which we have two of at this point in time for two different dates. So to do this, we've got first a link up top, which can take us to the website, which is the US Department of the Treasury, which you can also look up by just doing the good old Google search. We're looking for the daily Treasury par yield curve rates. So that's also shown here, the daily Treasury par yield curve rates for 2022. Now, if you look at this table, you'll note that the headers say we got the date, and then we've got the yields for how far out these are into the future with regards to maturities. So we've got the one month, we've got the two month, we've got the three month, the six month, and then it jumps up to a year, two year, three year, five year, seven year, 10 year, 20 year, 30 year. So notice it's not an even disbursement between these. So you could focus in on the shorter area, or you could focus in on the higher or longer part of the curve, or we can put them all together as we will do here and graph a curve with this data at one specific date. The oldest dates are up top. So if you go all the way down to the bottom of the curve, you'll get the newer information. So if we go all the way down, you've got your newer information on down below. So if we go back on over here, then you could copy say the headers. So if I copied the headers and put them into say Excel, it would look like this, the one month, the two month, the three month, the six month, the one year, the two year, the three year, the five year. Then I need to put that into some kind of number format because I need to be able to use that to create our graph. So in other words, I can't have one month. I've got to have a fraction of a year, which would be one divided by 12 or 0.083 of a year. Two divided by 12 would be 0.167 about of a year. Three divided by 12 would be 0.25 of a year. Then 50% of a year and then it jumps up to one year, which I can't have one year. I've got to have one, two, three, five. And notice it then jumps up to 10, 20 and 30. So we don't have those even intervals between the maturity dates. So you might focus in on the items under a year. You might focus on the items from like one to 10, for example, and then focus on like 10 to 30 or we can graph the whole thing. Then we're gonna grab some of the data and I've grabbed this one on 714, which was the date when I was working on this. That was this one. And we just copied that data and we just put it right here. So now we've got the one month. We've got the 1.99 yield and then two months it goes up as we would kind of expect. And the normal thing that you would expect is that as you have the longer durations towards maturity because you can think of it kind of like kind of like a loan situation, right? If you're locking your money down and if you were loaning someone money and you're committing them to have it for a longer period of time, you would expect then you would get a higher return than if you're gonna get your money back on a shorter period of time. But obviously that also is gonna be dependent on market conditions. So a normal curve you would expect to be doing something more like this, this kind of increasing item here because as the maturity dates are going further out into the future, as you are locking your money away longer in a bond, you would typically want in exchange for that OL sequel, the higher yields that are gonna be happening in the future. But due to market conditions, you could have situations looking more like this one where you've got this inverse situation and those are usually areas where people are gonna be more concerned about the economy when the yield curve starts to dip in that sense. But in any case, if we look at this, we've got then the yields going up as the periods go up here, the one year, it's at 3.162 years, it's at the 3.15. So you notice it kind of went down here. That's a little bit unusual, you would think that might be like a, you know, people might look and try to read something into that with regards to what is going on in the economy. It goes up to the 3.16 and then to the 3.06, 3.05 and then it goes down to 2.96. Again, it's going down a little bit strange. Then it goes up to the 3.36 and then to the 3.11. If I go to the next date, which I picked 1.322, which was the furthest apart in our set of data when I was looking at this before. So this one is generating this curve, which is a little bit more, at least up to here, what you would kind of expect, more of a normal curve, as they would say. So we've got the 0.05 and then it goes on two months we're at the 0.06, three months, 0.08, four months, 0.22 then one year, 0.4, two years, 0.78 and then to 1.04, 1.37, 1.55, 1.63, 2.05 and then it dips back down a bit on the 30 to the 2.01. So if we graph this out, you can practice graphing this out in Excel then and we do work this in Excel. It's a nice little graph to be mapping out. You can see this one, which is the older curve it was on January 3rd has more of that normal shape at least up until here. Now remember, you could kind of look at this curve in pieces like I could kind of remove the data that's passed a year and focus on the one to six month for example, and then give me more detail on this portion of the graph if that's what I'm concerned with. And this one has a little bit more strange of a structure. So you might be looking at this one and saying, hmm, that one, maybe there's something going on in the economy that would explain not having this normal kind of distribution that you would typically be looking for. And again, you might look more on this portion of the curve and zoom down on that higher increase. And then of course here you've got that inverse. So now it's going down at that point in time. So you could focus your data and trim it down to that range of data and zoom into it in that way. But that's the general idea of it. So again, great tool to be able to pick this stuff up from here and use that data in order to kind of work on the graphs and put together the graphs. And when you hear people discussing say on the stock picking channels or on the market channels and trying to predict the economy, are we going into a recession or things looking good in the future? Are we going into a time of growth and so on and this kind of stuff. They might be talking about the yield curve and you can pick up the yield curve and graph some of that stuff out and see if you could be in alignment with what they're saying. Remember, and of course that everybody's own perspective is usually geared to their own investment strategy and what their predictions are and nobody could predict the future. But they often use the yield curve to give some indications of some tool to get some idea of what's gonna happen in the future.