This chart of 10yr Treasury yields since 1790 is from Doug Kass at Real Money.

Dougie notes “The only time that yields have consistently been below current levels was WWII — 1941-44 — and and immediately after, to 1951, when the U.S. enforced a ceiling on yields. Even during the 1930s when the great Depression contracted the economy 25%, deflation drove yields to 2.5-4.0%.”

10’s are currently 2.436% after the durable goods number yesterday.

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10 yr Treasury yields since 1790

click for ginormous graph

hat tip via David W

Category: Fixed Income/Interest Rates, Inflation, Technical Analysis

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

17 Responses to “History of US Interest Rates: 1790-Present”

  1. MaciekKolodziejczyk says:

    I think it would worth to post the same chart, but adjusted for inflation. There was essentially no price increases between 1790 and 1913 (when the Federal Reserve was created), so we’re looking at apples and oranges in the same chart.

    And, it is also important to remember that one should compare current yields to future inflation – today’s 10 year yield should be compared with cummulative inflation till Aug 2020, which is obviously not known.

    Anybody has a chart like this?

    Maciek.

  2. tt says:

    also no competition for the Fed notes in usa since 1913.

    apples and oranges is indeed the correct analogy.

    let treasury notes and private money notes compete against fed notes and fed note yields scream like a stuck pig.

    usa is printing like a banana republic. oligarchs get all the dough and crumbs to the rest of us.

  3. Chief Tomahawk says:

    Calculated Risk has posted Bernanke’s speech this morning laid the groundwork for QE2. My question: do we know whether QE1 worked? Was it worth it? Whatever the case, stocks seem to be celebrating…

  4. Mannwich says:

    @Chief: “Worked” for whom? That’s the question. For Main Street, not so much, but it definitely “worked” for Wall Street.

  5. Curmudgeon44 says:

    I’m a little confused. I remember prime rates of 20 to 24% in the mid-1970s, yet the high 10-yr Treasury yields in this chart occur in the mid-1980s. Shouldn’t they track – at least directionally? Where’s the source data here?

  6. call me ahab says:

    it appears rates are about to get lower-

    “Bernanke stopped short of committing to any specific action. But he raised the prospect of another Fed purchase of securities, most likely government debt or mortgage securities, to drive down rates on mortgages and other debt to spur more spending by Americans.”

    what can more can be said: BB = Genius

    to flip everything on its head- and borrowing from the saying “everything is for sale- at the right price”

    we have BB’s new (hoped for) paradigm- “everyone will borrow- at the right rate”

    if that doesn’t work (could it be?)- then Fed goon squads will be created to drag people into banks- a gun put to their head asking – “what- our money’s not good enough for you?”

  7. SecondLook says:

    There was essentially no price increases between 1790 and 1913

    Only partially true. During that era there were periods of both inflation and deflation; due to great volatility of the economy – economic slumps, demand for credit during expansions, the cost of wars (for example: during the Southern Rebellion, prices increased by 70% from 1861 to 1865!) .

    The biggest, long term, economic driver that moved prices lower from 1790-1913 (what cost $1 in 1801 cost .58 cents in 1913), wasn’t monetary policy, but rather the Industrial Revolution which drove down the cost of production tremendously.

    Aside: Very few people are aware that American wages were already the highest in the world during that time. Thanks to the rapid and enthusiastic adoption of new technology, The U.S. was able to compete globally very successfully despite the wage differential. Something to think about…

  8. Real rates during WWII, and most other major wars in history, were seriously negative, in the range of double digits. Which makes sense. Real rates always turn negative during inflationary periods (they were also negative during the early 80′s) and there’s nothing more inflationary than war, where money is printed in order to buy things, so they can then be blown up.

  9. rktbrkr says:

    QE 1 worked for the 19 TBTF

    BB can’t control what happens on Main St but he can keep his buds supplied with free money to loan to Uncle Sam at a few % markup profit – the squeeze comes in when the market eats into that markup and they have (unaccounted for but real) mortgage and loan losses

  10. MaciekKolodziejczyk says:

    @SecondLook:

    I agree that there was much price fluctuation over that period, but this is partially to the fact that there was much lower number of goods and services available in the economy. If food is over 50% of your consumption basket (as it was back then in 18/19th century), then a good flood or drought can wreak havoc to your CPI.

    And, if as you say the prices decreased by ~0.5% per year over that 110 years period, then my suggestion to look at real returns is even more valid.

    And, as to the Civil War devastating price increase of 70% over four years, well we have a similar example in the 20th century – between 1975 and 1981 the prices increased by 70% as well – without a war on American soil.

    Maciek.

  11. so for the majority of the people reading this blog the overall theme of your life has been lived in the shadow of a giant interest rate spike.

  12. Chief Tomahawk says:

    Mannwich, I see more evidence of Main St. deteriorization every day. The local government here just demolished a block’s worth of single story retail (built in the ’60s? and empty for about two years) and it’s now just asphalt and concrete floor, well, except for the weeds.

  13. SecondLook says:

    If food is over 50% of your consumption basket (as it was back then in 18/19th century), then a good flood or drought can wreak havoc to your CPI.

    One of the distinguishing characteristics of 19th century America was, due to technological developments and the steady opening of vast amounts of highly arable land as we moved West, was a major increase in the food supply – that more than anything else allowed the great urbanization that occurred; especially in the 2nd half of the 19th century. It also resulted in generally lower prices, and food becoming a smaller and smaller part of household costs – and also at the same time both gradually decreasing the percentage of the population who farmed, and increased their incomes.

    Crop failures that would seriously drive up food prices were very rare in the States (unlike in Europe), and almost always very localized. Excluding the most important cash crop in the U.S. during the 1800′s – cotton. If any agricultural product had a major effect on inflation/deflation, it was cotton; but thanks to technology (recall the history of the cotton gin?), production was so strong, that over supply was more of a problem that shortages.

  14. monkeylove says:

    Forget the Fed. Only around 3 pct of total money supply consists of FRNs, coins, and paper bills, and only a portion of the same consists of government-issued money. Most of the total money supply consists of unregulated derivatives which operate regardless of interest rates and even fractional reserve ratios.

  15. machinehead says:

    Curmudgeon 44 — the prime rate peaks you remember happened during 1979-1981, rather than the mid-70s. (If you remember the Seventies, then you obviously missed out on Quaaludes.) From 1962 on, you can get yield data from the Federal Reserve. Their data shows a yield of 15.68% on the 10-year note during the week of 10/2/1981.

    http://federalreserve.gov/releases/h15/data/Weekly_Friday_/H15_TCMNOM_Y10.txt

    If you want to go all the way back to classical Greece and Rome to study interest rates, the late Sidney Homer’s History of Interest Rates is the place to go.

    In a nutshell, Homer found that interest rates follow a characteristic bathtub curve. They start high in primitive financial markets, with little more than secured pawnshop lending. In the high summer of financial sophistication and stable money, they reach a long flatline (think of Britain from 1815 to the early 1900s). Then, as national decay sets in, so does inflation. And rates head back up for different reasons — depreciating currency.

    It was ever thus. US yields are screaming across the Bonneville salt flats at supersonic speed. But a mountain range looms at the end. Pull up! Pull up! ;-)

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