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A fixed-income derivatives specialist working at a financial institution is tasked with understanding how to identify the most cost-effective U.S. Treasury bond to deliver when holding a short position in Treasury bond futures. The specialist aims to comprehend how the slope and shape of the yield curve impact the choice of the bonds that are deemed the least expensive to deliver.
A
An upward sloping yield curve favors low-coupon, short-maturity bonds.
B
An environment where bond yields are greater than 6% favors high-coupon, long-maturity bonds.
C
An environment where bond yields are less than 6% favors high-coupon, short-maturity bonds.
D
A downward sloping yield curve favors low-coupon, long-maturity bonds.