Today's 70+ basis point drop (120+ at one point) in the yield on 3-Month Treasury Bills makes the difference between the Federal Funds Target Rate and 3-Month Treasury yields by far the highest since at least 1983. The first chart below highlights their historical yields. Today's drop in 3-Month yields clearly shows the largest widening of spreads since 1983. The second chart highlights the percentage difference between the two, and as shown, the current spread of 73% is well higher than prior spikes in October '98, September '01 and June '03. All three periods coincided with drops in the Federal Funds Target Rate.
Thanks for the chart. Very interesting. The difference as of today is very striking, and the chart makes that even more clear. The flight to quality in treasuries today was huge.
Posted by: Aaron | August 20, 2007 at 05:45 PM