U.S. Treasury Yield Curve
Chart of the Week for November 25, 2016 - December 1, 2016
A "yield curve" plots yields of similar-quality bonds against their maturities, ranging from shortest to longest. By showing the relationship between the yields and the time to maturity, investors are able to compare the yields offered by short-term, medium-term, and long-term bonds. The yield curve may also suggest insights into investors' expectations for inflation and economic growth across different time periods. The closely watched U.S. Treasury yield curve is shown above.
In December 2015, the Federal Open Market Committee ("FOMC") of the U.S. Federal Reserve Board raised the target range for the Federal Funds Rate. Following that increase, the target rate range has remained unchanged. Short-term through 7-year rates have increased, and longer term rates (10-30 year) have shown little change through November 18, 2016. The increase in short-term rates can be attributed in part to investors and economists expectations of another target rate range increase in December 2016. In its November 2016 statement the FOMC said "The Committee judges that the case for an increase in the federal funds rate has continued to strengthen." Following the FOMC release, the November 21, 2016 Treasury auction of two-year notes resulted in the highest yields since 2009.
Investors should be aware that bonds and bond mutual funds generally lose value as yields rise and generally increase in value as yields fall.
Posted by: sarah_oz@yahoo.com
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