Charts of the Week

U.S. Treasury Yield Curve

Chart of the Week for August 16, 2019 - August 22, 2019

Interest rates have generally fallen over the past year.

U.S. Treasury yields over the past year as of August 9th have fallen across all but the shortest maturities as shown in the 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 can 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 (FOMC) of the U.S. Federal Reserve Board lowered the target range for the Federal Funds Rate (Fed Funds Rate) on July 31, 2019 for the first time in ten years. Expectations are for more possible rate decreases in 2019. While the FOMC focuses on inflation and employment with regard to setting the Fed Funds Rate, its July announcement mentioned "global developments" as well as "uncertainties" about the U.S. outlook for inflation and unemployment. Global growth has been slowing and Central Banks in other parts of the world have been lowering rates as well. Economists and fixed income experts note the inverted shape of the current yield curve, where yields are decreasing between the 1-month and 7-year maturities instead of increasing, as a possible indicator of a recession for the U.S. economy.

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 2019 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.

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