U.S. Treasury Yield Curve

Government Yields

See last month comparison  here

April 9, 2020 vs One Year ago


The graph above depicts the indicated yield or implied interest rates that result from a daily auction of various time maturities for U.S. Treasury debt obligations as of the date indicated. Shown together on a graph they are referred to as the Yield Curve for U.S. Treasuries.

The auction is a daily open market auction for the debt obligations (Security) of the U.S. Government. The horizontal or x axis shows each of the separate Securities in their specific time maturity and the vertical or y axis shows the indicated yield or implied interest rates from the auction.

Each Security is offered to the auction with a set interest rate. Bids to purchase each security at the auction are placed with a premium or discount to the face amount of the Security. This equates to a yield or interest rate the buyer is willing to accept for that maturity on that day. Putting these yields or indicated interest rates together in a graph showing the yield curve depicts where the market as defined by that day's auction perceives the relationship between short term interest rates and long term interest rates.

Since these Securities are backed by the full faith and credit of the U.S. government, they are considered to be the bedrock investment for very liquid, extremely low or no risk investments. As such, these interest rates are not commercial lending rates. Commercial lending rates will be considerably higher reflecting among other things risk, liquidity, administration expense, convenience facility expense (credit line reservation allowing draws and paybacks) and profit.

Even though the Treasury Rates do not reflect specific commercial lending rates, the Treasury yield curve does provide an important piece of the puzzle as to the degree and direction of change the market is indicating for interest rates. Commercial lending rates often reflect this trend to varying degrees which makes this useful information for the business person to consider when structuring the maturities of their debt.

In addition, some economists use the yield curve pattern as one part of an indication of where the economy is headed from an expansion/recession point of view. The thought goes that a slope up to the right indicates normal economic expansion (long term rates are higher than short term rates), a steep curve up to the right may be signaling a stronger expansion that could lead to an inflationary environment, a curve headed down or inverted (long term rates are lower than short term rates) may be signaling a recession and a flattening of the curve may be signaling a transition from one (normal, inverted) to another.

In any case, with this information we can formulate our own interest rate policy. Is it the right time to move some short term debt to long term or vice versa? 


Here is what the curve has done over the last month or so.

April 9, 2020

4-9-20 Month.PNG

Disclaimer: This data is not provided for any trading purposes and is for general information only. It is not intended to be kept current from day to day, so please note the date of the data referenced above. There are no warranties provided or implied by ThruThink® or Business BrainScience LLC as to the meaning of the information, any conclusions or actions derived from the data or accuracy of the data itself. The source of the data is provided above for the Users own investigation and verification.