The Federal Reserve embarked on its current policy of slashing
interest rates back on January 3, 2001. The benchmark Fed
Funds rate had been last raised to 6.50% on May 16, 2000, then
from 1/3/01 through 6/25/03, the Fed lowered the funds target to
1.00% with 13 cuts, 9 of 50 basis points (0.50%) each, 4 of 25.
With this in mind, I thought it would be interesting to examine
some key benchmarks, including U.S. Treasury yields, by taking
month-end figures from my “Week in Review” pieces. One item
of note is to remember how the Fed’s first 11 cuts left the 10-
year exactly where it was one year earlier before the first move.
In other words, those trading the long end of the yield curve are a
most independent lot. [Not that most of you didn’t already know
this.]
Of course the Fed only directly influences the short end of the
curve, while the long end is dominated by perception; perception
of strength in the economy and future expectations for inflation
being among the primary factors in setting bond prices.
Note: The * tells you that a Fed rate cut occurred in the period
prior to the week ending figures. I also make note of 9/11, as
well as the cycle low in the S&P 500 on 10/9/02.
Week ended…..2-yr.…10-yr. …S&P 500…..Gold
12/29/00………5.09…..5.11……..1320………272
1/6/01…………4.56…..4.93……..1298………269 * (1)
1/27/01……….4.77…..5.27……..1354………263
2/24/01……….4.52…..5.09……..1245………262 * (2)
3/31/01……….4.18…..4.92……..1160………259 * (3)
4/28/01……….4.26…..5.32……..1253………264 * (4)
5/26/01……….4.26…..5.51……..1277………278 * (5)
6/30/01……….4.24…..5.40……..1224………271 * (6)
7/28/01……….3.87…..5.10……..1205………267
8/25/01……….3.73…..4.92……..1184………275 * (7)
9/29/01……….2.82…..4.58……..1040………294 * (8) ^9/11
10/27/01………2.62…..4.52……..1104………278 * (9)
11/24/01………3.16…..5.00……..1150………273 * (10)
12/29/01………3.16…..5.11……..1161………276 * (11)
1/26/02……….3.18…..5.07……..1133………279
2/23/02……….2.92…..4.83……..1089………293
3/30/02……….3.70…..5.40……..1147………303
4/26/02……….3.23…..5.08……..1076………311
5/25/02……….3.22…..5.14……..1083………320
6/29/02……….2.82…..4.80………989………314
7/27/02……….2.21…..4.38………852………304
8/31/02……….2.15…..4.14………916………313
9/28/02……….1.80…..3.67………827………321
10/26/02………1.98…..4.09………897………313-10/9 S&P 776
11/30/02………2.06…..4.21………936………318 * (12)
12/28/02………1.61…..3.81………875………349
1/31/03……….1.71…..3.97………855………369
2/22/03……….1.59…..3.89………848………351
3/29/03……….1.54…..3.90………863………332
4/26/03……….1.56…..3.88………898………333
5/31/03……….1.32…..3.36………963………365
6/28/03……….1.35…..3.54………976………345 * (13)
7/16/03……….1.43…..3.92………994………343
Wall Street History will return 7/25.
Brian Trumbore
