Inverted Yield Curve A Hint of High Long-Term Rates

There was no Treasury auction on Tuesday. Secondary markets reinforced the inverted yield curve:

Figure 1

Source of raw data: U.S. Treasury

There has been a notable shift in yields in recent days. the period November 25-30 marked a high point for mos Treasury bills: the 4-week (4.16 percent), 8-week (4.33), 13-week (4.41), 17-week (4.55), 1-year (4.78). The 6-month bill paid 4.62-4.72 percent in that time frame, but stopped at 4.74 percent on Tuesday. 

These bill yields marked the high point of the recent rise. That is not the case with Treasury notes and bonds, the yields of which peaked in the first week of November. 

While these peaks seem to be permanently in the rearview mirror, this is not a reason to expect that Treasury yields will continue to come down. If the lower long-term yields are any indication, the market is going to stabilize over time around 3.75-4 percent. 

As of Monday December 5, total U.S. debt amounts to $31,353.8 billion. Our estimate of the average interest rate on this debt is 2.14 percent.

From November 1 to December 1, total debt increased 0.49 percent. This is down from 0.91 percent for the month of October. The average yield cost on total U.S. debt increased by 6.95 percent in November, compared to 7.66 percent in October.

---

We do not give investment advice. 

This blog provides analytical information solely for the purposes of 1) predicting the cost of the federal debt, and 2) for assessing the risk for a U.S. fiscal crisis. All information published here, forecasting and other, is based on publicly available data from the U.S. Treasury, including but not limited to approximately 65 percent of the current debt; on macroeconomic data, including but not limited to monetary policy decisions by the Federal Reserve; and on macroeconomic theory.