All rates rose in July. The yield curve narrowed from the previous month and extended its narrowing streak to three-months. The one-month bill maintained the lowest rate throughout the month. Short-term rates rose more rapidly than long-term rates thus the yield curve narrowed mostly from the bottom increasing the risk of an inversion brought upon by rising short-term rates. Such an inversion, if it were to happen would be a strong indicator for an upcoming recession.
Findings
- All rates rose in July.
- The one-month rate saw the largest absolute growth at 0.17 points.
- On a relative basis, the one-month rate grew the most with a 9.60 percent rise.
- The one-month bill maintained the lowest rate throughout the month.
- The yield curve narrowed 0.07 points.
Caveats
- As always, past performance is not indicative of future results.
- The rates have been at historic lows for quite some time which has not occurred previously.
Details
The breadth of the yield curve narrowed over the month from a range of 1.21 to a range of 1.14. The widest range was 1.21 (0.11 points lower than the previous month's widest range of 1.32) which was hit on July 23 and the narrowest 1.04 (0.13 points lower than the previous month's narrowest range of 1.17) which was hit on July 17.
The thirty-year bond held the highest rate throughout the month. It stagnated in the beginning of the month but rose dramatically in the middle to plateau again at the end. It has gone above 3 percent on July 21 and remained above it until the last trading day of the month. It should be noted that the 20-year rate has also risen above 3 percent on the last seven trading days of the month.
The one-month note held the lowest rate for every session of the month. However, it has hit a new 12-month high for the third time in three months and has not been as high as 1.94 (its high for the month) since June 10, 2008 when it was at 2.00.
Sources
"Treasury Constant Maturity," Federal Reserve Bank of St. Louis, accessed August 2, 2018, https://fred.stlouisfed.org/categories/115.