Svensson overshooting when fitting the bond yield curve.

Posted by SteveGe on
URL: http://quantlib.414.s1.nabble.com/Svensson-overshooting-when-fitting-the-bond-yield-curve-tp15926.html

We use below 5 bonds to fit a yield curve. and then calculate the YTM curve by calculating some fake bond from 1Y to 10Y with 0.5 year each step.  and Svensson YTM are off a lot between 1.5Y and 2.5Y.
As evidenced the curve shape is weird.  Is it known issue or I did not use it properly ?

Date settlementDate = new Date(26, September, 2014);
Settings.instance().setEvaluationDate(settlementDate)
Bond:(effectiveDate:2014-09-26, Period:1Y, Frequency:Annual, coupon:3.79, yield:3.79)
Bond:(effectiveDate:2014-09-26, Period:3Y, Frequency:Annual, coupon:3.97, yield:3.97)
Bond:(effectiveDate:2014-09-26, Period:5Y, Frequency:Annual, coupon:3.99, yield:3.99)
Bond:(effectiveDate:2014-09-26, Period:7Y, Frequency:Annual, coupon:4.16, yield:4.16)
Bond:(effectiveDate:2014-09-26, Period:10Y, Frequency:Annual, coupon:4.26, yield:4.26)

Term     YTM
1Y 3.79
1.5Y     4.113
2Y 4.105
2.5Y     4.038
3Y       3.9698
3.5Y     3.94
4Y       3.935498
4.5Y     3.9584
5Y       3.99
5.5Y     4.0346
6Y       4.0768
6.5Y     4.1224
7Y       4.1598
7.5Y     4.1959
8Y 4.22
8.5Y     4.24
9Y 4.25
9.5Y     4.26
10Y      4.257