The attached diagram traces the 10-year bond rates for the three types of bonds: high-quality corporates (Aaa), treasuries, and euro government bonds.

A)What do you think may reasonbly explain the spreads?

B)Would you have expected the lines to be almost parallel to each other? Explain.

C)What may explain the relatively constant spreads after 2016? Explain.

2004-01-27 2019-10-01 FRED 10-Year Treasury Constant Maturity Rate - 10-Year High Quality Market (HQM) Corporate Bond Spot Rate -Long-Term Government Bond Yields: 10-year: Main (including Benchmark) for the Euro Area Percent 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Shaded areas indicate U.S. recessions Source Board of Goonernors OFC Treasur 2004-01-27 2019-10-01 FRED 10-Year Treasury Constant Maturity Rate - 10-Year High Quality Market (HQM) Corporate Bond Spot Rate -Long-Term Government Bond Yields: 10-year: Main (including Benchmark) for the Euro Area Percent 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Shaded areas indicate U.S. recessions Source Board of Goonernors OFC Treasur