“Steeper”?
US: 1yr: 1.5%, 5yr: 2.2%, 10yr: 2.8%
Germany: 1yr: -0.60%, 5yr: -0.25%, 10yr: 0.5%
Came upon an intermarket carry trade so I go long the steeper market (US) and short the flatter (germany)… Answer guide has the German as steeper… hows that?
The yield curve difference between 5 and 10yr yields is the highest in German leading to a more lucrative carry trade
But isnt the 1 and 10 yr spreads better? The difference would provide net .2% with 1/10yrs long USD and short germ, vs .15 for 5/10yrs long germ and short usd.
I’d rather not have any germs at all, whether they’re long or short. Germs are icky.
(Yes: I’m in one of those moods today. Five Level III grading sessions today: one down, four to go.)
my bad. I accidentally looked at the 5yr and 10yr. but would love to know their explanation for the same.