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Interest rates: the long decline.

Interest rates are set by financial markets and influenced by the sale of United States Treasury securities and vice versa. Treasury bonds do not pay interest, rather they sell at less than their face value and pay in full on their maturity date. Subtracting the difference between the amount the Treasury bond is sold for and its face value gives the discount (interest) rate. U.S. Treasury bonds, due to their security, gauge interest rates by setting the interest rate floor of financial markets. The sale of U.S. Treasury securities and other federal open market practices are guided by the 12 members of the Federal Open Market Committee, which meets eight times a year in Washington, D.C. Treasury bonds are only, initially, sold at the New York Federal Reserve Bank.

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The graph is based on closing market bids obtained at the New York Federal Reserve Bank at 3:30 p.m. Eastern Standard Time each business day and illustrates the decline in the yield of Treasury bonds over the past 20 years. In 2011 the average yearly Treasury bond yield reached 3.019 percent, the lowest of the last 20 years; 41 percent lower than the 20 year average of 5.188 percent. Low interest rates allow funding of investments with lower yields, and theoretically boost economic growth by increasing the amount of business that gets funding.
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Title Annotation:ALASKA TRENDS
Author:Davidson, Paul
Publication:Alaska Business Monthly
Date:Jan 1, 2012
Words:231
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