What would you expect to have happened to the spread between yields on commercial paper and Treasury bills immediately after September 11, 2001?
A) no change, as both yields will remain the same
B) increase, as the spread usually increases in response to a crisis
C) decrease, as the spread usually decreases in response to a crisis
D) no change, as both yields will move in the same direction

Question

Quizplus · Accepted Answer

During a crisis, investors usually seek safe-haven assets, such as Treasury bills, causing their yields to decrease. This, in turn, increases the spread between yields on commercial paper and Treasury bills. Therefore, it is likely that the spread between these yields would increase immediately after September 11, 2001, which was a major crisis.

What Would You Expect to Have Happened to the Spread