Can you explain to me how rates on Treasury securities affect other
rates in our economy?

Can you descirbe for me the trend in interest rates over the past year
for various maturities of Treasury securities?

---

Request for Question Clarification by easterangel-ga on 18 May 2003 23:29 PDT

Hi! I was able to find a very nice article which is an answer to your
first question. On the second question I haven't been successful.

Would it be ok for you to break this question into 2 questions with an
adjustment of price so that I might be able to provide an answer for
the first one?

Thanks!

---

Clarification of Question by clvh-ga on 19 May 2003 06:28 PDT

If you could possibly find a yield curve in regards to 10-year
treasury note and then from this descirbe the trend in interest ratess
over the past year for the various maturities of Treasury securities.

The following site is probably the best one for your needs:
http://www.stockcharts.com/charts/YieldCurve.html

Using the animated chart, one can take a "snapshot" of the yield one
year ago and then generate a graphical picture of what has happened
over the subsequent year using the animation function.  Interest rates
for all maturities have dropped, with the sharpest decline in absolute
terms being in 5 and 10-year securities, followed by 30 year
securities.  The overall curve remains steep.

Here is another yield curve animation:

http://www.smartmoney.com/onebond/index.cfm?story=yieldcurve

There is an animated tool which allows you to display the treasury
yield curve from March of 1977 through April of 2003.  Useful
information about the various types of yield curves is also provided.

Detailed quantitative information by day on treasury interest rates
can be obtained from the U.S. Treasury at:

http://www.ustreas.gov/offices/domestic-finance/debt-management/interest-rate/yield-hist.html

Treasuries influence other interest rates in the economy because they
are directly calculated from them.  Some examples:

mortgages:  http://mortgage-x.com/general/treasury.asp,
http://www.fanniemae.com/markets/mbssecurities/about_mbs/arms/arm_features.jhtml?p=Mortgage-Backed+Securities

student-loan interest rates: 
http://www.salliemae.com/apply/borrowing/interest_fed.html

A more mathematical discussion of how treasury securities are used to
calculate interest rates is found in the following Excel spreadsheet:
http://www.coba.unt.edu/firel/conoverj/F5170/ToolKits/Ch%2005%20Tool%20Kit.xls
(text version) http://216.239.37.100/search?q=cache:GPrnbQ9XXJQJ:www.coba.unt.edu/firel/conoverj/F5170/ToolKits/Ch%252005%2520Tool%2520Kit.xls+Determination+of+interest+rates+treasuries&hl=en&ie=UTF-8

Short-term treasury securities are used to establish a risk-free rate
of return, while long-term treasury securities are used to establish
risk arising from inflation and fluctuating interest rates.  Because
the rates of treasury securities are established by a very liquid free
market, they are considered the best "collective wisdom" available
regarding inflation and interest rate expectations at any point in
time. Given that someone loaning money to anyone other than the
government runs additional the additional risks of possible lack of
liquidity and possible nonrepayment, a premium is added to the
treasury rates to generate an expectation of a profit that compensates
for the additional risks taken by loaning someone money compared to
investing in treasury securities.

I hope this addresses your questions.

Wonko

What I needed information on I was provided with.