Interest rates are the price of money, or one might say the price to rent money. The US Treasury Yield curve represents the rate of interest across the maturity spectrum for investments that are said to be "credit risk-free." This means investors are assured to get their money back. What is uncertain is what the purchasing power of the money when the loan matures. All US Dollar investments are priced relative to US Treasury T-bills, Notes & Bonds. Toss in a currency swap and you can price non-dollar denominated assets. Since all risk assets are priced relative to US Treasury debt instruments, it is important to keep an eye on the cost of money. Today we are going to take another look at the US Treasures to see if we can glean an idea of the future directions of interest rates and therefore the potential price action of risk assets.
