Interpolated Yield Curve - I Curve

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DEFINITION of '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. This can be accomplished by a number of methodologies, including bootstrapping and regressions.

INVESTOPEDIA EXPLAINS 'Interpolated Yield Curve - I Curve'

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.

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