Yield Curve History

May 4th, 2009 7:56 am | by John Jansen |

The 2 year/10 year spread has reached 225 basis points. That is approaching the very wide end of the range which has prevailed for that spread for the lat three decades. So a little history.

The cycle wide in this market iteration was achieved in November when it touched 261 basis points.

The all time wide was in 2003 at 274 basis points.

In 1992 the spread reached 265 basis points.

The 2year/30 year spread currently sits at about 318 basis points. In 2004 it peaked at 364 basis points.

The all time wide for that spread was 367 basis points in October 1992.

I recall that intra day it actually traded 369 basis points (October 5 1992). The 2 year traded at 3.60 and the 30 year traded at 7.29.

The curve steepened that day in response to a plunge in the stock market as equity traders were responding to the notion that one William Jefferson Clinton would be the next President. At the time that was viewed as a scary prospect.

It turns out that it was scary but for alot of other reasons.

Returning to the fixed income markets, I think that the record spreads which I have cited are in peril aas the market cchokes on the burden of supply from the Treasury.

And a thank you to David Ader of RBS Securities for his assistance with some of the numbers.

Be Sociable, Share!
  1. 5 Responses to “Yield Curve History”

  2. By Michael on May 4, 2009 | Reply

    Basic question. How do you distinguish between steepening of the curve due to a flood of supply and steepening of the curve due to decreased demand from increased risk appetite for other asset classes?

  3. By John Jansen on May 4, 2009 | Reply

    Two points:

    If you are long the curve, you wont care. It does not matter. YOU make money whatever the reason.

    And last week we steepened on the order of 20 basis points in the midst of last weeks barrage and ahead of this weeks barrage. I do not know how to quantify that but I have to believe very large chunk of the move is supply related.

  4. By Alex on May 4, 2009 | Reply

    Fed didn’t increase the size of its buyback programme so I imagine shorting Treasuries got a bit easier for the faint of heart.

  5. By Bman on May 4, 2009 | Reply

    As a matter of fact – they dropped ” facility is likely to be expanded” from the FOMC meeting language.

  1. 1 Trackback(s)

  2. May 7, 2009: Food For Thought: Ideal Interest Rate versus the Yield Curve

Post a Comment