Dr. Ed’s
Economic
Indicators

U.S. TREASURY YIELD SPREAD

Release Date: Daily
Release Coverage: Monthly-End
Released By: Treasury Department
Official Release (weekly): http://www.treas.gov/offices/domestic-finance/debt-management/interest-rate/yield.shtml

The U.S. Treasury yield spread measures the long minus short spread from U.S. Treasury yield curve. In ths case the spread is the difference between the 10-year Treasury bond and the 3-month T-bill.

Treasury yield curve rates are commonly referred to as "constant maturity Treasury" rates. Yields are interpolated by the Treasury from the daily yield curve. This relates the yield to its time to maturity and is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market.

WHAT DR. ED SAYS:

The Treasury yield spread has several different implications and uses as it pertains to representing economic conditions, as well as forecasting. One generally accepted indication of a higher spread is that higher GDP growth is likely to occur over the next 12 months. If spread is negative (i.e., the inverted yield curve) or near a zero level, slow growth may occur or even a recession. This sort of conclusion should be analyzed by reviewing the entire yield curve among other indicators, such as inflation expectations. Through past recessions, this spread moves from lower/negative/zero into a much higher spread over a short period of time following the upward trending the growth generally follows.

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