Kenneth R. Szulczyk
the term structure of interest rates for U.S. securities because the U.S. government issues a
variety of securities with maturities ranging from 15 days to 30 years. No other finance
company or business issues a wide range of securities that differ by maturity than the U.S.
government. We show the interest rates for U.S. government securities in Table 1 for three
specific dates: July 28, 1999, July 31, 2000, and July 17, 2006. Year 1999 was a good year for
the U.S. economy as it grew fast with a low unemployment rate. Yield curve for years 2000 and
2006 predicted the recessions in 2001 and 2007.
Taxed Bonds Municipal BondsFigure 4. Impact of taxes on the bond markets
Table 1. Term Structure of Interest Rates for U.S. Government Securities
Maturity 7/28/1999 7/31/2000 7/17/2006
1 month N/A N/A 4.91
3 month 4.71 6.27 5.11
6 month 4.79 6.42 5.3 0
1 year 5.04 6.07 5.24
2 year 5.54 6.3 0 5.12
3 year 5.59 6.24 5.07
5 year 5.7 0 6.16 5.04
7 year 5.97 6.19 5.04
10 year 5.81 6.04 5.07
20 year 6.3 0 6.13 5.23
30 year 6.01 5.79 5.1 0
Economists plot U.S. government securities by the market interest rates and maturity, which
they call a yield curve. Yield curve could display a positive, negative, or flat slope and has two