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 1998 and 1999. In 2000, yield curve inverted. That is, 10-year note yields were lower than 2-year note yields. Often this behavior signals an economic slowdown. This time, the inversion was at least partly due to reduced Treasury borrowing, particularly in the 30-year market. As a result, the 30-year bond began to lose its benchmark status. On October 31, 2001, the Treasury announced the indefinite suspension of the 30-year security altogether. This generated a greater demand for 10-year notes which increased their price and lowered their yields.

Short Term Perspective
The yield on the 10-year note remained unchanged in November, and so did the spread to the 2-year note. Bond yields generally rose in tandem during the month.

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