2017 Charts of the Week

U.S. Treasury Yield Curve

Chart of the Week for November 10, 2017 - November 16, 2017

Over the past year, short-term interest rates have risen faster than long-term interest rates.

U.S. Treasury yields over the past year have risen across the board as shown in the yield curve chart above.  Yield curves plot 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 Federal Open Market Committee of the U.S. Federal Reserve Board raised the target range for the Federal Funds Rate three times in the past year (December 2016, March 2017, and June 2017) and expectations are for another increase in December 2017. Yields have risen across all maturities, but the increase has been greater in the short- and medium-term yields than in the long-term yields. One-month yields have increased about 0.77 percentage points, while 30-year yields have increased only 0.17 percentage points. One key measure watched by some economists is the spread between the 2- and 10-year Treasury yields. The November 7th, 2017 spread was 0.69%, which has not been this low since November 2007. Some economists believe that the shape of the yield curve suggests that investors are expecting growth and inflation both to be low in the future in spite of an improving job market in the U.S. and generally improving global economic conditions.

Investors should be aware that bonds and bond mutual funds generally lose value as yields rise and generally increase in value as yields fall.

© Copyright 2018 ICMA Retirement Corporation, All Rights Reserved. This information is intended for educational purposes only and is not to be construed as investment advice or a solicitation to buy or sell securities. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed here. Past performance is not necessarily indicative of future performance.

Return to top