America Treasury Yields and Economic Indicators: A Multivariate Linear Regression Analysis

Abstract

This article provides a comprehensive analysis by employing multivariate linear regression to examine the intricate relationship between U.S. Treasury yields and several crucial economic indicators, with a particular focus on the year-over-year growth rate of the Consumer Price Index (CPI) and the size of the Federal Reserve’s balance sheet. The research spans a decade, analyzing data from 2014 to 2024, offering a robust time frame to evaluate long-term trends. The primary goal of the research is to identify how these economic factors influence Treasury yields, which are key indicators for understanding government borrowing costs and broader financial conditions. In particular, Treasury yields are crucial for determining the cost of financing public debt, while the CPI growth rate serves as a reliable measure of inflation, and the Federal Reserve’s balance sheet reflects its monetary policy stance. By investigating these relationships, the research aims to provide valuable insights for policymakers, investors, and financial analysts into how inflationary pressures and monetary policy actions interact to shape financial markets, potentially affecting investment strategies and economic decision-making. These findings offer actionable knowledge for managing economic risks and opportunities.