The market yield on U.S. Treasury securities at 2-year constant maturity minus the federal funds rate is an important economic indicator that reflects the difference in interest rates between short-term and long-term debt instruments.
The U.S. Treasury Department publishes daily data on the yield of Treasury securities with various maturities, including the 2-year constant maturity. The Federal Reserve, on the other hand, sets a target range for the federal funds rate, which is the interest rate at which banks lend to each other overnight.
When the market yield on 2-year Treasury securities is higher than the federal funds rate, it suggests that investors expect interest rates to rise in the future. This can occur when the economy is growing and inflation is picking up, leading the Federal Reserve to raise short-term interest rates to keep inflation under control.
Conversely, when the market yield on 2-year Treasury securities is lower than the federal funds rate, it suggests that investors expect interest rates to fall in the future. This can occur when the economy is slowing down and the Federal Reserve is cutting interest rates to stimulate growth.
Overall, the market yield on U.S. Treasury securities at 2-year constant maturity minus the federal funds rate is a key metric that provides insight into the outlook for interest rates and the broader economy.