SIE EXAM ASKS QUESTIONS ABOUT U.S. TREASURY SECURITIES INCLUDING CHARACTERISTICS OF CREDIT SPREADS BETWEEN SHORT TERM VERSUS LONG TERM BONDS
One thing about the Securities Industry Essentials (SIE) exam, it asks questions about debt securities, specifically about Treasury bills, notes and bonds. Some SIE candidates study only stocks, but that overlooks the importance of becoming familiar with bonds on the SIE exam.
How do I know this about the SIE Exam? I know this from FINRA's Content Outline for the SIE Exam. Section 2.1.2 indicates that test candidates should know how debt securities operate, and in particular, a candidate must be able to explain credit spreads and compare characteristics of short-term bonds and long-term bonds.
Bob Eder in his Study for the Securities Industry Essentials (SIE) Exam presents a full treatment of Treasury securities including coverage of credit spreads. Here is a sample of Bob Eder's treatment:
Bond Credit Spreads (2.1.2)
Bond traders and market analysts
consider various bond credit spreads to be indicative of various market moves.
A credit spread means the difference in yield between, for example, the
two-year Treasury note and the 10-year Treasury bond (or note). Historically,
there is an average spread that forms the basis of whether the current spread
is too wide or too narrow. The market normally shows a normal yield curve,
where yields of long-term bonds are higher than yields on short-term bonds. If
the average spread in a normal yield curve, comparing the yield of the two-year
note to that of the 10-year bond, is 150 basis points, any spread below that is
narrow, and any spread above that is relatively wide.
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