Thursday, June 21, 2007



I Still Don't Get It


This is what the yields on 30 day US Treasury Bills have done over the past three months. In the mean time, other short-term rates have held steady. The Federal Reserve's target Fed Funds rate has been 5.25% over this period. 30 - 45 day commercial paper is at 5.24%. The one month LIBOR rte is 5.32%. One month negotiable CDs are at 5.31%. And one month eurodollar rates are at 5.39%.
Over the same period, the interest rate on the 10 year Treasury Note has done this. Resulting in a yield curve that is no longer inverted.
I understand why the long-term rates are going up. But why are the one-month TBill rates going down? I will buy a six pack of Heineken for the first person who explains this to me.

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