Graph #1 |
The skinny white vertical lines are not really lines. They are gaps in the daily data. I don't know why there are gaps; they're not "regular" enough to be mostly weekends. Anyway there are gaps in the data, and when FRED filled the area with color for the area graph, it kept the gaps as gaps.
This next graph uses the same daily data for the same time period, but shows it a different way.
Graph #2 |
The changes in the red line are clearly visible in the blue. I had to hunt to find them, but they are there.
I like this way of showing the yield spread.
I want to use this "spread and negative fedfunds" comparison graph to look at the 1990s now. But, oh, apparently the daily data only goes back to the year 2000. So I switched to weekly data for this one:
Graph #3 |
In 1994 and early 1995, on the graph FedFunds goes from below -2.5% to below -5% (really, it increased from around 3% to around 6%). As FedFunds rose, the spread fell; it reached zero in July 1995, five years before the start of the 1990-91 recession.
You can see the Fed reducing the FedFunds rate from 6% to 5% in late 1995 and early 1996; and you can see the spread rising up from zero in 1996. Then in early 1997 you can see the FedFunds rate increase to about 5.5% and stay there for more than a year as the spread falls to zero again.
I won't bore you with every excruciating detail of this. But maybe you can tell why I like the graph: It really lets you see what happened with the policy rate and the yield spread.
And the relevant detail? The spread hit zero five years before a recession hit the economy.
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