Treasury Yield Curve

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The Yield Curve is a visual representation of the interest rates the U.S government pays to borrow money(debt;bonds) over various lengths of time. It shows the yield(reward) an investor is expecting to earn if he lends his money to the government for a certain period of time. The curve change shapes at different points in the economic cycle, but it is normally upward sloping. The shape of the curve give investors insight of the future course of interest rates as well as monetary policy initiatives by the FED. A normal upward sloping curve means that long-term bonds have a higher yield. This means you will lend the government your money for a long period of time for a greater reward. Whereas an inverted curve shows short-term bonds have a higher yield. This is when short term lenders earn greater rewards than the long term lenders who have greater risk. That’s not normal. When the yield curve inverts it means a recession is to follow within a year or two. The Yield Curve is the most accurate tool we have to predict recessions so it’s important to pay attention when it moves out of it’s normal upward formation. The Yield Curve chart we have created is interactive which give you the opportunity to check for any maturity series you desire. The general rule of thumb is to measure short term yields against long term yields. The infamous 2 yr notes vs 10 yr notes is the one you hear most economist refer to. Most financial analyst keep their eyes glued on the 3 month bills vs 10 yr notes. Feel free to exhibit the WSJB Yield Curve Chart. All data updated from the US Department of Treasury.


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