Trader Personal Assistant

About Federal and Treasury Interest Rates

Federal interest rate changes are among the most significant factors affecting bond prices which are inversely related to bond yields.

The cardinal rules are:

  1. When interest rates rise, bond prices fall and bond yields rises
  2. When interest rates falls, bond prices rises and bond yields falls (vice versa)

When you see the interest rates of the Federal Reserve and 10-year Treasury Bond intersect, this is a divergence of the rule, which is a bearish indicator and a sign of a weakening economy and in some cases, an oncoming recession.

As an example, see the following periods,

  1. May 2000 - Mar 2001
  2. Jun 2006 - Dec 2007

We all know what happened in the 6 to 12 months after that!

Click the Month/Year scroll button on 2 ends (left & right) above the chart and drag horizontally to see the graph for a window period

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2 Years Treasury 5 Years Treasury 10 Years Treasury 30 Years Treasury Federal Interest