During expansions, five-year Treasury rates have historically tracked fairly closely to nominal growth, that is, growth not adjusted for inflation. In the long run, nominal growth and long-term rates tend to converge (Figure 2, page 2). While the correlation between the two is far from perfect, particularly in the short run, nominal growth expectations can provide a general guideline for our rate projections. Given the dismal levels of growth notched during the depth of the recession, our
Treasury Outlook: A Closer Look
