Figure 14-3: Increases in total domestic nonfinancial debt drive the 10-year Treasury yield
With modest variations, the same cause-and-effect relationship between growth in total domestic nonfinancial debt and the Prime Rate shown in figure 14-2 holds true here with the 10-year Treasury rate. It is also driven by financial market forces, primarily supply and demand for U.S. government debt.
Current Comment: The 10-year treasury yield has risen less than other interest rates in recent years, to such an extent that long-term rates now are as low as some shorter-term rates (representing the widely discussed inversion of the “yield curve” at this time).
