Understanding what the treasury markets are really saying


I hear constantly that the 10-year treasury curve represents where the markets believe the interest rate will be in 10 years. However, how accurate is this conclusion? Isn't the 10-year treasury diluted by short-term speculators? Or is it really an accurate gauge?

Comments (8)

Jan 13, 2019

curiousgeorgewarren, have you checked out these or run a search:

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You're welcome.

Jan 15, 2019

I have not! Thanks for the suggestions.

Jan 16, 2019

Did you just reply to the bot? Interesting....

Jan 15, 2019

if only it was this simple....sigh...

just google it...you're welcome

Jan 16, 2019

Well it isn't just a loose "belief" in that a bunch of analyst are just BSing all day picking rates out of a hat and "thinking" that is what the 10 year rate will be.

Long term rates are an aggregate of short term rates over the longer term horizon. So a 1 year rate can be (loosely) calculated by taking the expected return of, say, two consecutive 6 month rates. Obviously you're more at risk buying into the longer term rate given the fact that you are less liquid, so that would be priced in as well.

But yeah... short term speculation CAN impact long term rates. It's about as accurate as it can get though.

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Jan 15, 2019

Thanks FW.

Mar 18, 2019

Short answer: Yes

Long answer: depends from what angle you're looking