Treasury Notes and Interest Rates
Chart of the Week for February 18-24, 2005
Since July 2004, the Federal Reserve has raised the fed funds rate by a total of 1.5%, a result of six one–quarter point increases. The rate is currently at 2.50%, following the most recent hike in February. A rise in interest rates historically results in a decrease in bond prices, and therefore an increase in bond yields. The Fed Funds rate has the most dramatic impact on short–term bond products. As you can see from the US Treasury 2–Year Note line above, these yields have been gradually increasing along with the rising interest rates. However, the long–term 10–Year Note, to the surprise of many market watchers, has seen a slight decrease in its yield during the same time period.
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