The yield curve, also called the term structure of interest rates, refers to the relationship between the remaining time-to-maturity of debt securities and the yield on those securities. Yield curves have many practical uses, including pricing of various fixed-income securities, and are closely watched by market participants and policymakers alike for potential clues about the market’s perception of the path of the policy rate and the macroeconomic outlook.
Board staff daily produces several yield curves. One is the nominal U.S. yield curve, based on the yields on coupon-bearing nominal government securities (Treasury notes and bonds). Another is the TIPS (Treasury inflation-protected securities) yield curve, based on yields on the U.S. government’s inflation-indexed debt. From these curves, the so-called inflation compensation (breakeven inflation rate) are also computed. Board staff also estimates several no-arbitrage term structure models, which are dynamic models that describe the movements of the yield curves while respecting the condition that there is no arbitrage in the bond market. One such model is the three-factor nominal term structure model, which can be used to decompose nominal yield curves into the so-called expectations and term premium components.
These models are a staff research product and not an official statistical release. Accordingly, they are subject to delay, revision, or methodological changes without advance notice.