Treasury Rate Movements, December 2018

Jan 4, 2019
US treasury rates by maturity

The one, three, and six-month rates rose in December while all other rates dropped.  The yield curve narrowed from the previous month thus extending its narrowing streak to two months.  The one-month bill did not maintain the lowest rate throughout the month.  Long-term rates fell while short-term rates rose thus 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

  • The one, three, and six-month rates rose in December.  All other rates dropped.
  • The one-month rate saw the largest absolute growth at 0.13 points.
  • On a relative basis, the one-month rate grew the most with a 5.26 percent rise.
  • The three-year rate saw the largest absolute drop at 0.37 points.
  • On a relative basis, the three-year rate dropped the most with a 13.07 percent drop.
  • The one-month bill did not maintain the lowest rate throughout the month.  On three occasions, the three-month bill had the lowest rate.
  • The yield curve narrowed from 0.99 to 0.58.

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.
  • All figures are rounded to the nearest hundredth.

Details

range of US treasury rates

The breadth of the yield curve narrowed over the month from a range of 0.99 to a range of 0.58.  The widest range was 0.97 (0.30 points lower than the previous month's widest range of 1.27) which was hit on December 3 and the narrowest 0.59 (0.40 points lower than the previous month's narrowest range of 0.99) which was hit twice, once on December 24 and once on December 31, the last trading day of the month.  The last time the yield curve was this narrow was on August 27, 2007 when it hit a range of 0.59.

high rate and maturity

The thirty-year bond held the highest rate throughout the month.  It dropped precipitously in the beginning and the middle of the month and has failed to recover since.  It has remained at or above 3 percent for the entire duration of the month.  It should be noted that the ten and 20-year rates have fallen below the 3 percent threshold.  The last time the 30-year rate hit this month's low of 3.00 was on August 30, 2018 when it was at 3.00.

low rate and maturity

The one-month note did not hold the lowest rate for every session of the month.  The three-month bill held the lowest rate on three occasions: December 20, December 21, and December 27.  The one-month also hit a new 12-month high for the eighth time in eight months and has not been as high as 2.44 (its high for the month) since February 14, 2008 when it was at 2.50.

Sources

"Treasury Constant Maturity," Federal Reserve Bank of St. Louis, accessed January 3, 2018, https://fred.stlouisfed.org/categories/115.

Filed under: Economic Data