Unexpectedly Intriguing!
July 3, 2007

What a difference six weeks make! Once again, the Federal Reserve left the Federal Funds Rate unchanged at 5.25%, but this time, the U.S. Treasury yield curve rates look a lot prettier!

Instead of the inverted condition that predominated most of the last year, the yield of the 10-year Treasury moved solidly above the yield of the 3-month Treasury earlier this month, greatly reducing the probability of recession occurring in the next 12 months. The following chart visualizes the change in probability level:

Probability of Recession, Tracking from 6-23-2003 through 6-28-2007

Using the one-quarter averages of the U.S. Constant Maturity Treasuries and Federal Funds Rate, we find the probability of recession occurring in the U.S. in the next 12 months to be 38.1%, down sharply from the level of 49.3% just six weeks ago.

Meanwhile, using the most recent daily-discounted yield data of 4.62% for the 3-Month Treasury and 5.08% for the 10-Year Treasury with the Federal Funds Rate of 5.25%, which gives an indication of the direction in which the probability of recession is heading, came in at 24.8%.

You know, if the Fed were inclined to raise interest rates to combat inflation, they now have a lot more room to maneuver.


About Political Calculations

blog advertising
is good for you

Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:

ironman at politicalcalculations.com

Thanks in advance!

Recent Posts


This year, we'll be experimenting with a number of apps to bring more of a current events focus to Political Calculations - we're test driving the app(s) below!

Most Popular Posts
Quick Index

Site Data

This site is primarily powered by:

This page is powered by Blogger. Isn't yours?

Visitors since December 6, 2004:

CSS Validation

Valid CSS!

RSS Site Feed

AddThis Feed Button


The tools on this site are built using JavaScript. If you would like to learn more, one of the best free resources on the web is available at W3Schools.com.

Other Cool Resources

Blog Roll

Market Links
Charities We Support
Recommended Reading
Recommended Viewing
Recently Shopped

Seeking Alpha Certified

Legal Disclaimer

Materials on this website are published by Political Calculations to provide visitors with free information and insights regarding the incentives created by the laws and policies described. However, this website is not designed for the purpose of providing legal, medical or financial advice to individuals. Visitors should not rely upon information on this website as a substitute for personal legal, medical or financial advice. While we make every effort to provide accurate website information, laws can change and inaccuracies happen despite our best efforts. If you have an individual problem, you should seek advice from a licensed professional in your state, i.e., by a competent authority with specialized knowledge who can apply it to the particular circumstances of your case.