Long Term Perspective
The yield between the 2-year note and the 10-year note reflects changes in the economic environment. When the spread narrows, it reflects potential softening in economic activity -- possibly even recession. Until late October 2001, market players focused on the 30-year bond, but now that the Treasury announced it will no longer issue new long bonds, attention has shifted to the 10-year Treasury note as a benchmark security.

Short Term Perspective
In the past few months, bond investors have come to the realization that the economic recovery is soft. Bond market players don't expect the Fed to start raising rates soon. A faltering stock market coupled with geopolitical pressures and corporate scandals have caused many investors to turn to Treasury securities, which raised their price and lowered their yield. The yield on the 2-year note as been relatively stable these past couple of months, but 10-year note yields are starting to rise slightly. A burgeoning budget deficit means that the federal government will have to borrow more - and that means an increased supply of Treasury securities in the coming year.

Alternative Inflation Measures   •   Gold Prices   •   Employment Cost Index   •   Civilian Unemployment Rate

Pool of Available Labor   •   Nonfarm Productivity   •   Treasury Yields   •   Stock Prices   •   Fed Monetary Policy Summary