Chart of the week

Treasury yields, and Fed fund expectations, decline

Rates move lower across the yield curve

June 1, 2018 | 1 minute read
Rates move lower across the yield curve
  • The 10-year U.S. Treasury yield drew particular interest in mid-May when it reached a four-year high of approximately 3.11%.1 The move seemed to confirm some investors’ fears that interest rates could continue their march higher and run the risk of slowing down economic growth in the United States.
  • Since its recent peak, however, the 10-year yield fell sharply, approximately 27 bps in just 10 trading days, as investors absorbed a new round of political strife in Italy and Spain.1 At approximately 2.88% on June 1, the 10-year Treasury note is now squarely back into the range in which it has traded through most of 2018.1
  • As the chart shows, yields across the curve moved lower since reaching their mid-May highs. In the same time frame, market expectations for the target federal funds rate declined approximately 13 bps, or approximately half of one rate hike in 2018, and by a full rate hike (approximately 25 bps) for 2019.2
  • Investors should not overemphasize the importance of any two-week period. Yet recent declines across the yield curve and Fed funds rate expectations underscore the potential challenges that income-seeking investors could continue to face in 2018 and beyond.

  • Federal Reserve Bank of St. Louis,

  • Target federal funds rate expectations based on Bloomberg as of May 31, 2018.

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