Advertisement

CreditUnions.com

Remember Me
Register | Forgot Password?

2



October 11, 2004


Join the Conversation



2000 characters left
  


Comments

RSS

Anonymous

7/26/2012 04:12 PM

If you apply the "real" Fed Funds rate you speak of (approx. 1%-2% over the rate of inflation) with such low 10-year rates then the "real" yield curve is close to inverted, often an indicator of an oncoming recession. Will the Fed then look to keep the rate artificially lower than the "real" rate to prevent an inverted yield curve? Does it matter - are the economic fundamentals of the 10-year rate being lower than the "real" Fed rate enough to induce the consequences generally associated with an inverted yield curve? It's pretty tough make any money, net of inflation, off of 10-year Treasuries these days.

Anonymous

7/26/2012 04:12 PM

"You are correct," the real rate of return earned by clipping coupons off of the ten-year appears quite meager these days. It is interesting to note though, that by extending the analysis performed on the targeted Fed funds rate to the Treasury curve it becomes apparent that the "real" curve is still upwardly sloping. Additionally, should the Fed tighten enough to achieve neutrality, it is likely that other rates/yields will also approach, if not entirely achieve, their long-term real average.

Advertisement
Advertisement
Advertisement
Platinum Suppliers   |   Get Listed
Copyright © 2016 Callahan & Associates, Inc. All rights reserved. Website design and website development by Americaneagle.com