BZ Bread

by George Schils.

Interest rate yield curve on Oct. 16, 2008

Friday, October 17, 2008

Treasury note data is as of 5:22 p.m. EDT 10/16/08 (Treasuries data is from WSJ.com.)

1-Month Bill* 2/32 0.091
3-Month Bill* 8/32 0.497
6-Month Bill* 8/32 1.147
2-Year Note* -5/32 1.637
5-Year Note* -5/32 2.852
10-YR Note* -6/32 3.970
30-Year Bond* -1 1/32 4.254

It is interesting that the 1-month note bears an interest rate of near zero. Even though the short term inter-rate bank lending rate is very high, the Federal rate is near zero.

The Fed has been pushing down short term interest rates by instrumenting rate cuts. They keep pushing down the short end when it rises and this keeps the yield curve from inverting. Yield curve inversion, which we do not have here, is one indication of a recession.

The yield curve using data points is shown below.

yield curve Oct. 16, 2008

And the fitted curve is given next.

fitted yield curve