Long Term Perspective

Often, one can get a sense of market expectations by looking at the spread between the 2-year note and the fed funds rate. When the spread narrows, or even turns negative, it means that market participants expect the Fed to ease monetary policy. When the spread widens, market participants are looking for tighter monetary policy.

Short Term Perspective

The spread between the 2-year note and the federal funds rate has been negative for six months through November. This implies market expectations of Fed easing.

2-year Treasury Yield & Spread to Fed Funds   •   30-year Treasury Yield & Spread 30-year less 2-year

Yield Spread: AAA Corporate vs. 30-year Treasury   •   Yield Spread: Baa Corporate vs. 30-year Treasury

Yield Spread: Bond Buyer vs. 30-year Treasury