M1 M2 10 Year Treasury Note Yield Exercise You Will Need To

M1 M2 10 Year Treasury Note Yield Exerciseyou Will Need To Track M1

You will need to track M1 and M2 from the Federal Reserve Web site and submit a chart for each. For the 10-Year Treasury Note yield (in percentages), you will need to track this using the Wall Street Journal's Web site, , or (these sites are available through the UMUC library). This will also be submitted as a chart by week 6. You will be responsible for providing a trend analysis of your findings in at least a paragraph that accompanies each of your three charts. You can start from 2013 and go back 10 years.

If you have problem to find data for 2013 you can start from 2012 and go back 10 years. The purpose is students should know how to do this exercise.

Paper For Above instruction

The exercise of tracking M1, M2, and the 10-year Treasury Note yield over the past decade offers valuable insights into the relationship between monetary aggregates and long-term interest rates. This comprehensive analysis involves gathering data from reputable sources such as the Federal Reserve Website for money supply measures and the Wall Street Journal or the UMUC library resources for the Treasury yields. The objective is to understand economic trends and monetary policy impacts over the specified period, beginning either from 2012 or 2013, depending on data availability.

Money Supply Data: M1 and M2 are critical indicators of the economy's liquidity and are published regularly by the Federal Reserve. M1 includes physical currency, demand deposits, traveler's checks, and other checkable deposits, representing the most liquid forms of money. M2 encompasses all of M1 plus savings deposits, mutual funds, and other near-money assets. Tracking their historical levels from 2012 or 2013 through to the present helps reveal shifts in liquidity and economic sentiment over time. For instance, during periods of economic uncertainty or crisis, M1 and M2 tend to expand as the Federal Reserve implements accommodative monetary policies to stimulate growth.

Long-term Treasury Yield Data: The 10-year Treasury Note yield serves as a key benchmark for long-term interest rates in the economy. It influences mortgage rates, corporate borrowing costs, and investment decisions. The yield data is available through financial news sources such as the Wall Street Journal, which compiles daily yields, or through the UMUC library’s access to financial databases. Analyzing its trends over time reveals how market expectations, inflation, monetary policy, and economic outlooks impact long-term borrowing costs. For example, during periods of quantitative easing or when inflation expectations rise, the 10-year yield may decline or increase accordingly.

Trend Analysis: Once the data is collected and visualized through charts, the trend analysis involves examining the correlation between liquidity measures and long-term yields. For example, during 2012-2013, the Federal Reserve was beginning to taper its asset purchases, and the data may show gradual increases in long-term yields alongside stable or modest increases in M1 and M2. Conversely, during the COVID-19 pandemic starting in 2020, massive liquidity injections led to expansions in M1 and M2, yet yields initially plummeted due to flight-to-safety, only to later rise as economic recovery continued.

This exercise provides practical skills in data collection, visualization, and economic analysis, fostering a better understanding of monetary policy's effects on financial markets. By comparing trends over the decade, students can better appreciate how monetary aggregates and interest rates interplay, shaping economic conditions and policy decisions.

References

  • Federal Reserve Economic Data (FRED). (2023). M1 and M2 Money Stock. Federal Reserve Bank of St. Louis. https://fred.stlouisfed.org/
  • The Wall Street Journal. (2023). Treasury yields. https://www.wsj.com/
  • Board of Governors of the Federal Reserve System. (2023). Money Stock Measures. https://www.federalreserve.gov/
  • U.S. Department of the Treasury. (2023). Treasury Yield Data. https://home.treasury.gov/
  • Investopedia. (2023). Understanding the 10-year Treasury yield. https://www.investopedia.com/
  • Cecchetti, S. G., & Schoenholtz, K. L. (2020). Money, Banking, and Financial Markets. McGraw-Hill Education.
  • Gürkaynak, R. S., Sack, B., & Swanson, E. (2007). The Sensitivity of Long-Term Interest Rates to Economic News: Evidence from the US Treasury Market. Journal of Financial Economics, 89(2), 392-421.
  • Bernanke, B., & Blinder, A. S. (1992). The Federal Funds Rate and the Transmission of Monetary Policy. American Economic Review, 82(4), 901-921.
  • Jensen, M. K., & Peersman, G. (2005). The Effectiveness of Monetary Policy: A Structural VAR Analysis of the Euro-area. Journal of Applied Econometrics, 20(5), 531-552.
  • Friedman, M. (1969). The Optimum Quantity of Money and Other Essays. Aldine Publishing Company.

Related Assignments