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Subscriber Q&A

 

A few days ago Alan Greenspan was a guest on CNBC. One of the things he said was the current yield spread between the 5yr treasury note and 30yr treasury bond was the widest in US history and that such a wide spread indicates a lack of confidence. My questions is, do you know what Mr. Greenspan means when he says the spread indicates a lack of confidence? And if so, would you explain it to your readers?

 

LD

 

 

Dear LD:

 

The spread refers to the difference in the interest rate on 30-year Treasuries now being some 200+ basis points higher than yields on the 5-year Treasury (3.73% vs. 1.64%). That means investors are willing to accept a lower interest rate in order to keep their funds more liquid in those shorter-term 5-year notes. They're uncertain about the future, and therefore reluctant to tie up their money for 30 years, meaning that the ... Log in or subscribe to continue reading.


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