U.S. Treasury Yields and the One Year Term
October 02, 2007
The yield on the 10-year Treasury has dropped 10 points since last week when the yield was threatening 5.00%. Looking at the yield curve from 90 days to 30 years we see an increase of only 102 basis points from 3.78% to 4.80% marking a less dramatic inflation bias than expected by many market watchers. Trading in U.S. Treasuries continues to suggest that the market expects the Fed to weight the risks of slow economic growth over that of runaway inflation. Investors looking to find the best term for their fixed-income securities will note the bump in yields at one year providing incentive to lock-in for that term. The one year term is interesting because by then we expect to know the effect on the economy of the rates cuts by the Fed. It is possible that long term rates will be more attractive in one year if the economy starts to produce more growth and price inflation.
