The yield curve has flattened since last month, with rates falling for Treasuries with maturities of one year or longer, and rising for those of less than a year. The most closely watched spreads have both dropped well below their long-run averages: The 3-year, 3-month spread declined from 91 basis points to 55 basis points, and the 10-year, 3-month spread from 110 to 72 points. Such a fall often predicts slower future economic growth. The middle of the yield curve has taken on a rather bumpy appearance because the complicated interplay between expected rates and risk has generated some unusual movements in the wake of the stock market correction in late October.
Suggested citation: “Interest Rates,” Federal Reserve Bank of Cleveland, Economic Trends, no. 97-11, pp. 06, 11.01.1997.