Figure 3. Selected interest rates, 2002-09. Data are plotted as curves.
There are two panels. In the top panel, the interest rate on 10-year Treasury securities begins at about 5 percent in January 2002 and then drifts downward, on balance, to a low of about 3.5 percent in mid-2003. It then rises gradually, on balance, to a little more than 5 percent in June 2006 before moving back down throughout 2007 and the beginning of 2008, reaching about 3.5 percent in March 2008. The series then climbs to 4 percent in June 2008, declines in the following months, and oscillates between 3.5 and 4 percent in the July to November period. The series falls to 2.4 percent by year-end 2008, then moves slightly higher to nearly 3 percent by mid-April 2009. The target federal funds rate starts at 1.75 percent at the beginning of 2002 and steps down to reach 1.25 percent at the end of 2002 and then to 1 percent at the end of 2003. It stays at that rate until July 2004, when it begins to rise steadily to reach 5.25 percent in July 2006, where it remains through August 2007. The target federal funds rate then trends downward to approximately 2.25 percent in April 2008 and remains at 2 percent from May 2008 to September 2008. On December 16, 2008, the Federal Open Market Committee established a target range for the federal funds rate of 0 to 1/4 percent. This range is represented by a small black rectangle on the chart that begins in December 2008 and extends through March 2009. In the bottom panel, the interest rate on high-yield corporate bonds starts at about 12.5 percent in the beginning of 2002, slips slightly, then rises to 14 percent in October 2002. It then drops to about 8 percent by the end of 2003, remaining in a narrow range around 7.7 percent through March 2007, rising again through the rest of 2007, with a small 0.5 percentage point dip in the early fall of 2007, and reaching about 11 percent in March 2008. The interest rate on high-yield corporate bonds remains in that approximate range until July 2008; it then climbs to about 18 percent in October 2008, increases to a high of about 22 percent in December 2008, then trends downward and ends the March 2009 period at about 20 percent. The interest rate on Moody's Baa corporate bonds begins at about 8 percent in 2002 and then drifts downward, on balance, to reach about 6 percent in January 2005. It remains at about that level through September 2005. The rate then remains in a range of about 6 to 8 percent until mid-2008, when it begins to trend upward, reaching about 9 percent in October 2008 and surpassing 9 percent in November 2008. The interest rate on Moody's Baa corporate bonds then declines to a range of approximately 8.1 to 8.4 percent in the December 2008 to March 2009 period. The interest rate on 30-year fixed-rate mortgages begins at about 7 percent in 2002 and remains at about that level for a few months before it declines to reach a low of about 5.25 percent in mid-2003; it 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 6.8 percent in mid-2006 before dropping back to 6.2 percent by early 2007. It then rises again, to 6.7 percent by July 2007, then falls steadily to about 5.75 percent in January 2008. The interest rate on 30-year fixed-rate mortgages climbs to 6 percent in March 2008 and to 6.5 percent in August 2008, but then falls to 5.3 percent by January 2009 and to about 5 percent in March 2009.
NOTE: The data are monthly and extend through March 2009.
SOURCE: For Treasury securities, mortgages, and Moody's corporate bonds, Federal Reserve Board, Statistical Release H.15, "Selected Interest Rates"; for federal funds, Federal Reserve Board; for high-yield corporate bonds, Merrill Lynch Master II index.
