10-Year US Treasury Yield

Chart of the Week for July 23-July 29, 2004

The interest rate environment in the second quarter of 2004 was largely impacted by investor anticipation of the June 30 Federal Reserve Open Market Committee (FOMC) meeting. Market participants expected a rate increase in the Federal Funds rate driving market rates higher. It is normal that market rates move based upon expectations about the future. The 10-yr. US Treasury Note, for example, rose 1.0% over the quarter prior to the Fed Funds rate increase. As anticipated, the FOMC raised the rate from its historic low of 1.00% to 1.25%. However, market rates remained within their trading range (indicated by the green dashed lines), since they had already moved prior to the Fed action.

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