Business Studies Essay Paper on The U.S. Treasury Yield Curve

The U.S. Treasury Yield Curve

The U.S. Treasury yield curve is an important concept that analyses the yields/ returns of short and long term treasury bills, bonds and notes. These are very liquid investment products and monitoring these products is of paramount importance. It helps the U. S treasury department to determine the price of the products over their respective years of investment. The treasury is responsible for fixing their different prices with respect to their face value, maturity period and their interest rates (Mobius, 2012).

Investors make crucial decisions on these investments regarding their earnings from these investments. They analyze the interest rates of treasury bonds in comparison with other kinds of investments such as shares (Saliterman, Magnuson, & Withoff, 2011). This is based on the closing interest index showed by the curve.

Investment companies are interested in raising capital for their investments. The most suitable form of raising capital is bonds. The rise in the rate of interest greatly affects the performance of these bonds. The price of interest rates is inversely proportional with interest rates. The current interest rates show a favorable form of investment. This is arrived at as the current U.S Treasury yield curve shows a positive return on investment (Saliterman, Magnuson, & Withoff, 2011). The curve shows a positive daily rise in the return on the investment as it is seem to rise across the slope.

Floatation costs are the cost incurred or met by a company in the process of issuing investment securities to the public. While a company is borrowing from the public by issue of bonds it has to meet legal fees, registration and underwriting costs.  Floatation costs vary with different companies. Registration will involve costs incurred to register the bonds with investment banks and other investment corporations (Mobius, 2012). Underwriting costs involve costs incurred by a company in soliciting for clients in the public.

References

Mobius, M. (2012). Bonds: An introduction to the core concepts. Singapore: Wiley.

Saliterman, R. A., Magnuson, R. J., & Withoff, P. J. (2011). Advising Minnesota corporations and other business organizations. Huntington, N.Y: Juris Publishing, Inc.