BIS Review 21/2006  1  3/4 percent, that yield is not much above the target federal funds rate of 4-1/2 percent and, indeed, is about even with yields for maturities of one to three years. In the remainder of my remarks I will speculate on the reasons for and consequences of this historically unusual behavior of long-term rates.
The recent behavior of longer-term yields Some discussion of the arithmetic of longer-term yields provides a useful perspective on recent developments in bond markets. The ten-year Treasury yield, for example, can be viewed as a weighted average of the current one-year rate and nine one-year forward rates, with the weights depending on the coupon yield of the security.