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Long Term Perspective
The spread between long and short interest rates tends to widen near economic downturns and narrows during recovery/expansion. The spread narrowed in the second half of 1999. In late January, early February, the yield curve inverted. That is, the yield on the 30-year bond was lower than the yield on the 2-year note. Often this behavior signals an economic slowdown. This time, the inversion is at least partly due to reduced Treasury borrowing in the 30-year market. To some degree, the 30-year bond is losing its benchmark status as the key indicator of economic and inflation trends. Short Term Perspective
Some investors have turned to the 10-year Treasury note as the new benchmark, but its yield has also headed lower in the past month. In October and November, many investors increased their demand for the 30-year bond as equity prices tumbled. The difference between the 2-year and 30-year Treasury securities remained negative in November, but the spread narrowed.
 Yield Spread: AAA Corporate vs. 30-year Treasury • Yield Spread: Baa Corporate vs. 30-year Treasury Yield Spread: Bond Buyer vs. 30-year Treasury |
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