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1 1 (February 25, 2019)

handle is hein.crs/govyht0001 and id is 1 raw text is: Congressional Research Service Low Interest Rates, Part 1: Economic and Fiscal Implications Updated February 25, 2019 Since the 2007-2009 financial crisis, U.S. interest rates have been unusually low by historical standards. This Insight discusses the implications of low interest rates for households and fiscal policy. Its sequel, Low Interest Rates, Part 2, discusses implications for monetary policy. Low Interest Rates When describing interest rate trends, each debt instrument is different. The interest rate on every debt instrument is determined by market supply and demand for that instrument, and each instrument has different characteristics, including issuer, maturity length, and liquidity. Analysts often focus on two specific interest rates to gauge overall interest rate trends-the yield on Treasuries (marketable federal debt instruments) and the federal funds rate (the overnight interbank lending rate). Treasury yields play a central role in financial markets because they are highly liquid (easily tradeable) and are seen as posing negligible default risk, whereas default risk varies from company to company for private debt. A common benchmark for long-term rates is the 10-year Treasury yield. Figure 1 illustrates how Treasury yields fell during the financial crisis and have not yet recovered to precrisis levels. Since 2008, 10-year Treasury yields have remained below 4%. Prior to that, yields had not been below 4% since the early 1960s. Typically, yields ise as an expansion strengthens, but yields are lower today, with the economy near full employment, than they were at the onset of the recovery. Yields on mortgages and corporate debt have followed a similar pattern. Congressional Research Service https://crsreports.congress.gov IN11044 CRS INSIGHT Prepared for Members and Committees of Congress -

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