The graph (attached) depicts yield curves for 5 November 2021, 5 November, 2022, and 5 November, 2019. The yield rates are given for each of those in the graph (attached).a) On 5 November 2019, policy rate stood at 1.5-1.75%. In March 2020, the central bank cut policy rate first by 50bps on 4 March then by 100bps on 16 March, to 0-0.25% (where it remains). Could market particiapts from two years ago (5 November 2019) predict that those cuts were coming? Yield Curves, 5-Nov-19, 5-Nov-20 and 5-Nov-212.502.342.172.001.861.881.871.771.621.631.631.661.561.571.561.581.451.501.301.541.04.321.000.790.660.560.500.390.3305-Nov-20190.180.140.090.100.100.1005-Nov-2020-05-Nov-20210.000.120.141 Yr2 Yr3 Yr5 Yr7 Yr10 Yr20 Yr30 Yr1 Mo2 Mo3 Мо6 Мо5 Yr1 Yr1.62Date2 Yr3 Yr7 Yr10 Yr20 Yr30 Yr05-Nov-20191.561.571.561.581.631.631.661.771.862.172.3405-Nov-20200.090.100.100.100.120.140.180.330.560.791.321.5405-Nov-20210.050.060.050.070.140.390.661.041.301.451.881.87

Policy rate cuts of Fed are part of expansionary monetary policy.

Answered: The graph (attached) depicts yield…

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The graph (attached) depicts yield curves for 5 November 2021, 5 November, 2022, and 5 November, 2019. The yield rates are given for each of those in the graph (attached).

a) On 5 November 2019, policy rate stood at 1.5-1.75%. In March 2020, the central bank cut policy rate first by 50bps on 4 March then by 100bps on 16 March, to 0-0.25% (where it remains). Could market particiapts from two years ago (5 November 2019) predict that those cuts were coming?

Yield Curves, 5-Nov-19, 5-Nov-20 and 5-Nov-21
2.50
2.34
2.17
2.00
1.86
1.88
1.87
1.77
1.62
1.63
1.63
1.66
1.56
1.57
1.56
1.58
1.45
1.50
1.30
1.54
1.04
.32
1.00
0.79
0.66
0.56
0.50
0.39
0.33
05-Nov-2019
0.18
0.14
0.09
0.10
0.10
0.10
05-Nov-2020
-05-Nov-2021
0.00
0.12
0.14
1 Yr
2 Yr
3 Yr
5 Yr
7 Yr
10 Yr
20 Yr
30 Yr
1 Mo
2 Mo
3 Мо
6 Мо
5 Yr
1 Yr
1.62
Date
2 Yr
3 Yr
7 Yr
10 Yr
20 Yr
30 Yr
05-Nov-2019
1.56
1.57
1.56
1.58
1.63
1.63
1.66
1.77
1.86
2.17
2.34
05-Nov-2020
0.09
0.10
0.10
0.10
0.12
0.14
0.18
0.33
0.56
0.79
1.32
1.54
05-Nov-2021
0.05
0.06
0.05
0.07
0.14
0.39
0.66
1.04
1.30
1.45
1.88
1.87

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