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, the 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 spread between the 2-year and 10-year notes narrowed by a tick or two in October as long-term rates edged up by a smaller amount than short-term rates.

2-year Treasury Yield & Spread to Fed Funds   •   10-year Treasury Yield & Spread 10-year less 2-year

Yield Spread: Aaa Corporate vs. 10-year Treasury   •   Yield Spread: Baa Corporate vs. 10-year Treasury

Yield Spread: Bond Buyer vs. 10-year Treasury