The single statistic that best explains why the U.S. economy continues to boom is the interest rate on the Treasury bond that matures 30 years from now. The interest rate could go even lower, perhaps even below 5 percent. Long-term Treasury rates have a big effect on practically every other lending rate, especially on mortgages. Nearly every lender in America is now charging less than 7 percent for home financing. State and local agencies can also borrow for less, since Treasury rates are the key to municipal bond rates.
Businesses benefit because the rates they pay on their own loans go down.
That means lower expenses and more profits. And, finally, low interest rates encourage consumers to borrow more and spend more. The Treasury first introduced the 30-year bond to the U.S. public in 1977. Those first 30-year bonds yielded 7.63 percent. The precise yield, which is the bond's dividend in dollars divided by its price, is determined first by an auction of large investors.