INTEREST RATES

Current Yield Curve and Recent Shifts: The short-end of the yield curve has moved up as the Fed commenced its interest rate normalization program.

The long-end of the yield curve has fallen significantly such that the full yield curve is now inverted in the mid to long end.

Yield curve has flattened with inverted mid-range.

10-year, which had fallen to 1.55%, jumped to 1.90% following Middle East oil storage attacks.

Trends in U.S. Treasury Yield Curve Spreads: Here we can see the movements in the slope of the Treasury yield curve.

The spread of both the 10-year to 2-year and 10-year to 3-month have tightened to recent historic lows.

The 10-year to 2-year spread has narrowed to 11 bps.

And the 10-year to 3-month spread has narrowed to negative 6 bps.

Sign of weakening economy like in past cycles? Only time will tell.

 

Yield Curve Maturity Walk: The yield curve has inverted with the short- and intermediate segments up to 3-years trending down. Some modest recovery of the inversion commences at the 5-year segment.

Yield Curve YoY Change by Maturity: Short end of the yield curve is down 2 bps YoY. While the long end has fallen 60 to 120 bps reflecting the heightened uncertainty that now exists.

 

Yield Curve Shifts Latest Three Years: Here we show a three year progression of the yield curve which shows the rising, flattening and inverting trends.

YoY, 3-month Treasuries are down ~20 bps; while 2-year Treasuries are down ~100 bps and 10-year Treasuries are down ~90 bps.

From two years ago,, 3-month Treasuries are up ~90 bps; while 2-year Treasuries are up ~45 bps and 10-year Treasuries are now above to 2017 levels by 30 bps.

For Community Banks, how have interest rate spreads held up?

Historical Yield Curve Highs and Lows: Lastly, here we show a historical view of the yield curve to reflect on the dramatic differences that have occurred over the decades since the 1980's.

Interest rates peaked during 1981 with interest rates across the yield curve in the 14 to 16% range and inverted (short-end higher than long-end).

This is on the other end of the spectrum from the recent lows where the yield curve in 2008 contained interest rates from 0 to 2%. 10-year Treasuries are below 2008 levels by nearly 90 bps reflecting heightened caution and uncertainty.

Or even today's inverted yield curve.


Interest Rate and Yield Curve Spread Trends:

10-yr US Treasury vs. 2-yr US Treasury

10-year U.S. Treasury compared to 2-year U.S. Treasury Since 2000

10-yr US Treasury vs. 3-mo US Treasury

10-year U.S. Treasury compared to 3-month U.S. Treasury Since 2000

 

10-year U.S. Treasury compared to 2-year U.S. Treasury Since 1980

10-year U.S. Treasury compared to 3-month U.S. Treasury Since 1980