Interpolated Yield Curve (I Curve)
A yield curve derived by using on-the-run treasuries. Because on-the-run treasuries are limited to specific maturities, the yield of maturities that lies between the on-the-run treasuries must be interpolated, which can be accomplished by a number of methodologies, including bootstrapping and regressions. Investopedia Says:
Several different types of fixed-income securities trade at yield spreads to the I curve, making it an important benchmark.
For example, certain agency CMOs trade at a spread to the I curve at a spot on the curve equal to their weighted average lives. A CMO's weighted average life will most likely lie somewhere within the on-the-run treasuries, which makes the derivation of the I curve necessary. Related Terms:
Bootstrapping
Collateralized Mortgage Obligation - CMO
Off-The-Run Treasuries
On-The-Run Treasuries
Term Structuve of Interest Rates
Yield Curve
Yield Spread |