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10-year Treasury yields do not closely follow changes in the fed funds rate (%)

10

The federal funds rate (FFR) is the Fed's primary monetary policy tool and reflects the rate banks charge on overnight loans to other banks. Because it's a very short-term rate, the FFR has the most direct impact on other short-term interest rates across the economy.

The yield on the 10-year Treasury has

many drivers. For example, when economic confidence is high, demand for safe-haven assets (like Treasuries) falls. This pushes prices lower and yields higher. Yields are also influenced by uncertainty related to future inflation, growth and geopolitical risk. The 10-year Treasury yield may impact other longer term rates in the economy such as fixed-rate mortgages and corporate borrowing costs.

Understanding these differences is helpful for investors who look to the yield curve for signals about the economy and fixed-income markets.

Source: Federal Reserve Bank of St. Louis

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