Federal Reserve Bulletin

Profits and Balance Sheet Developments at U.S. Commercial Banks in 2005

Figure 2. Selected interest rates, 2001-06. Data plotted as curves. Two panels. In the top panel the interest rate on ten-year Treasury securities begins at about 5 percent in January 2001 and then drifts downward, on balance, to a low of about 3.5 percent in mid-2003. It then rises gradually, on balance, to end at about 4.5 percent in March 2006. The target federal funds rate starts at about 6 percent at the beginning of 2001 and drops to about 1.75 percent by the end of 2001. It then drops a bit further over each of the next two years to reach 1.25 percent at the end of 2002 and 1 percent at the end of 2003. It remains at that rate until July 2004, when it begins to rise to reach about 4.5 percent in March 2006. In the bottom panel, the interest rate on high-yield bonds starts at about 13.5 percent in the beginning of 2001 and remains in a fairly narrow range about that level through the end of 2002. It then drops to about 8 percent by the end of 2003 and remains in a narrow range about that level through March 2006, when it registers about 8.5 percent. The interest rate on Moody's Baa corporate bonds begins at about 8 percent in 2001 and then drifts downward, on balance, to reach about 6 percent in January 2005. It remains at about that level through September 2005 and then rises, on balance, to almost 6.5 percent in March 2006. The interest rate on thirty-year fixed-rate mortgages begins at about 7 percent in 2001 and remains in a narrow range around that level through April 2002. It declines to reach a low of about 5.25 percent in mid-2003 and then moves in a range between about 5.5 percent and about 6 percent for the next two years. From about 5.5 percent in mid-2005, it rises, on balance, to almost 6.5 percent in March 2006.

Note: The data are monthly and extend through March 2006.

Source: For Treasury securities, mortgages, and Moody's corporate bonds, Federal Reserve Board, Statistical Release H.15, "Selected Interest Rates" (www.federalreserve.gov/releases/h15); for federal funds, Federal Reserve Board (www.federalreserve.gov/fomc/fundsrate.htm); for high-yield bonds, Merrill Lynch Master II index.  Return to article