Interest Rates

The chart below shows the interest rates on short-dated (3-month T-Bills) and long-dated (10-year T-Notes) US Government debt securities. In a 'normal' situation the longer-dated securities will have a higher yield than their shorter-dated cousins (to compensate investors for the greater risk of currency depreciation over the longer term). In the rare circumstances when this is not the case the end result is an inverted yield curve, indicated on the chart by the blue line moving above the pink line.

Money Supply

M2 consists of currency, checkable deposits, household savings deposits, most time deposits, and retail money market mutual funds. Excluded from M2 (and included in M3) are institutional money funds, large time deposits, repurchase agreements, and Eurodollars (US dollars deposited in banks located outside the US). The first of the below charts shows the year-over-year M2 growth rate since 1995. The second chart shows the CPI-adjusted year-over-year M2 growth rate (the M2 growth rate minus the rate of change of the median CPI), also known as the "real M2 growth rate", since 1998. Real M2 growth is a reliable leading economic indicator with an average lead time of 6-9 months.