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 positive spread between the 2-year note and the federal funds rate increased sharply in November, partly due to Fed easing and partly due to the fact that bond investors are now looking for an economic recovery early in 2002. The yield on the 2-year Treasury note increased sharply between the beginning of November and the end of the month. The monthly average shows only a slight rise though.

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