Short-Term Yields

Short-term yields mean the returns investors earn from holding shorter-maturity bonds. In simple terms, short-term yields show the interest rate investors demand for lending money over a short period. Short-term yields are important because they are closely influenced by central bank policy and expectations about near-term interest rates. When the Fed raises rates, short-term yields often move higher. For example, the 2-year Treasury yield is often watched as a signal of market expectations for Fed policy. Short-term yields are not the same as long-term yields. Short-term yields usually respond more directly to central bank policy, while long-term yields also reflect longer-term growth and inflation expectations.