If you listen to the investment strategists, fixed-income specialists, financial press, politicians, and employees of the Federal Reserve System, you would think that interest rates are under control of the Open Market Committee of the Federal Reserve Board. We do not think this is true at all, with only one exception. The only rate the Federal Reserve can influence is the overnight Federal Funds Rate. We contend that all other rates from the 1-week T-Bill rate to the yield to maturity on the 30-Treasury US Treasury Bond are set by market forces of supply and demand. The balance of this article will present our argument on why we believe this is the case. Let's start at the beginning.
