importance in the global money markets, it is instructive to examine the relationship between Treasury bill yields and LIBOR. We expect LIBOR rates to be higher than the yields on bills of the same maturity because investors in Eurodollars CDs are exposed to default risk. Panel a of Exhibit 3.6 presents a Bloomberg graph of the yield curves for U.S. Treasury bills and LIBOR (out to a maturity of 1 year) on March 13, 2002. The Treasury bill yield curve is the lower curve and is represented by a solid black line. Panel b of the exhibit pre- sents the data used in constructing the two yield curves. The fourth col- umn indicates the spread between LIBOR and the Treasury bill yield for a given maturity. In order to understand the relationship between LIBOR and Treasury bill yields over time, we examine the period January 1, 1987 to December 31, 1999. We focus on the spread (in basis points) between 3-month LIBOR and 3-month Treasury yields each week (Friday) during this time period. Exhibit 3.7 is a time series plot of weekly spreads. Two striking features can be observed. First, there are a handful of prominent spikes in the data that reflect financial/global crises. Second, spreads trend down- ward over the time period. We will consider each feature in turn.   EXHIBIT 3.6 Bloomberg Screen of LIBOR and Treasury Bills Yields a. LIBOR and Treasury Bill Curves     U.S. Treasury securities and the U.S. dollar are considered "safe havens" in times of crisis, regardless of their underlying causes. During times of turmoil, the resulting "flight to quality" widens the spread between LIBOR rates and T-bill rates. For instance, the first spike in the data occurs in October 1987. At the end of October 1987, the spread between 3-month LIBOR and 3-month bills was 252 basis points. Five weeks earlier, the spread was 106 basis points. The catalyst, of course, for this huge increase in the spread was the collapse of the worlds equity markets. On October 19, 1987, the Dow Jones Industrial Average fell 22.6% while markets tumbled around the world. The total world wide decline in stock values exceeded $1 trillion.15 The next spike occurs in the fall of 1990. The precipitant was the invasion of Kuwait by military forces from Iraq on August 2, 1990. Dur- ing the next several weeks, the combination of rising oil prices and slow- ing U.S. economy caused a severe drop in U.S. stocks. By the middle of October, U.S. stocks had fallen by 18%. Once again, investors around the world fled to the safety of U.S. Treasuries and the spread widened to 159 basis points at the end of December 1990 (just prior the January 15, 1991 United Nations imposed deadline for Iraq to withdraw from Kuwait).