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Economy in Brief

U.S. Interest Rates Begin To Nudge Higher
by Tom Moeller   December 06, 2010

Tentative indications of improvement in U.S. economic activity began recently to lift interest rates. Short-term rates have risen slightly as investors' fear near-term action by the Federal Reserve. Amongst the economic indications are lower initial claims for jobless insurance, higher vehicle and home sales as well as improved ISM readings on factory and service sector activity. Last week's report of weakness in nonfarm payrolls is expected to improve with this month's figures. Investor fears generally are not shared, however, by economists. Through year-end 2011 the National Association for Business Economics (NABE) survey has left short-term rates unchanged from current levels. 

The prospect of the Fed keeping short-term rates low, along with economic improvement, has lifted long-term rates. Investors fear the ultimate inflationary consequences and the need for greater Fed tightening, later. Economists generally share this concern and see the 10-Yr. Treasury rate at 3.25% in twelve months. In a recent television interview, Fed Chairman Ben S. Bernanke downplayed these inflationary fears. Mortgage rates rates also have moved up modestly to date. The rate on 15-year fixed rate mortgages has inched up to 3.81% from its low one month ago of 3.57%. As might be expected rates on adjustable rate mortgages have not risen from the 3.25% low.

Interest rate data are available in Haver's USECON, WEEKLY and DAILY databases. The NABE figures can be found in the SURVEYS database. 

U.S. Interest Rates Latest Nov. Oct. Dec. '09 2009 2008 2007
Fed Funds 0.20 0.19 0.19 0.12 0.16 1.93 5.02
1 Month Treasury 0.16 0.13 0.14 0.03 0.10 1.29 4.40
1 Year Treasury 0.29 0.25 0.23 0.37 0.47 1.82 4.52
5 Year Treasury 1.68 1.35 1.18 2.34 2.19 2.80 4.43
10 Year Treasury 3.01 2.76 2.54 3.59 3.26 3.67 4.63
Corporate Bond  Aaa 4.95 4.87 4.68 5.26 5.31 5.64 5.56
15-Year Fixed Rate Mortgage (FHLMC) 3.81 3.68 3.68 4.35 4.58 5.63 6.03
One-Year ARM 3.25 3.25 3.38 4.30 4.71 5.18 5.56
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