SOURCE: Kamakura Corporation

Kamakura Corporation

April 19, 2010 10:00 ET

Kamakura Releases 10 Year Monthly Forecast of U.S. Treasury Yields and Swap Spreads

Kamakura Forecasts Based on Forward Rates Implied by Current Yields

NEW YORK, NY--(Marketwire - April 19, 2010) -  Kamakura Corporation announced its forecast Monday for U.S. Treasury yields and interest rate swap spreads monthly for the next 10 years. Today's forecast shows 1 month Treasury bill rates peaking at 5.465% in the fourth quarter of 2017 and the 10 year U.S. Treasury yield at 5.745% on March 31, 2020. The negative 21 basis point spread between 30 year U.S. dollar interest rate swaps and U.S. Treasury yields reflects the blurring of credit quality between these two yield curves. The U.S. government is no longer seen as risk free, and 4 of the 8 panel banks that determine U.S. dollar libor are receiving massive government assistance and are, in effect, sovereign credits. For more on the panel members, see The negative 30 year spread results in an implied negative spread between 1 month libor and 1 month U.S. Treasury yields (investment basis) beginning in January 2015. The projected movements in the U.S. Treasury yield curve are shown in the image to the right.

The forecast shows that dramatic variations in the spread between interest rate swaps and U.S. Treasuries are embedded in current yields.

The Kamakura forecast for U.S. Treasury yields and interest rate swap spreads is available each Friday afternoon on the Kamakura blog at this link:

The Kamakura interest rate forecasts are based on the forward interest rates embedded in the current U.S. Treasury yield curve and interest rate swap curve. These forward rates are extracted using the maximum smoothness forward rate approach first published by Kamakura's Donald R. van Deventer and Kenneth Adams in 1994 and modified in Financial Risk Analytics (1996) by Kamakura's Imai and van Deventer. The maximum smoothness approach is applied directly to forward rates in the case of U.S. Treasury yields and it is applied to forward credit spreads, relative to the U.S. Treasury curve, in the case of the swap curve.

Kamakura's rate forecast is available in electronic form, both in Kamakura Risk Manager table format and other forms, by subscription. For more information contact Kamakura at

Kamakura's President Warren A. Sherman said Monday, "Realistic simulations of future interest rates are critical to the management of credit risk, market risk, asset and liability management, and liquidity risk. Kamakura's Robert Jarrow and then Cornell colleagues David Heath and Andrew Morton showed that forward rates are at the very heart of no arbitrage simulations of the future economy. At a point in U.S. economic history where interest rates are at historic lows and the spreads between U.S. Treasuries and interest rate swaps are negative at the longer maturities, we think the need for a high quality interest rate forecast with a 100% grounding in high quality financial analytics is a critical benchmark for all risk managers. We're grateful to the large number of market participants who encouraged us to initiate these forecasts."

About Kamakura Corporation

Founded in 1990, Honolulu-based Kamakura Corporation is a leading provider of risk management information, processing and software. Kamakura, along with its distributor Fiserv, was ranked number one in asset and liability management analysis and liquidity risk analysis in the RISK Technology Rankings in 2009. Kamakura Risk Manager, first sold commercially in 1993 and now in version 7.1, was also named in the top five for market risk assessment, Basel II capital calculations, and for "risk dashboard." Kamakura was also ranked in the RISK Technology Rankings 2008 as one of the world's top 3 risk information providers for its KRIS default probability service. The KRIS public firm default service was launched in 2002, and the KRIS sovereign default service, the world's first, was launched in 2008. Kamakura has served more than 200 clients ranging in size from $3 billion in assets to $1.6 trillion in assets. Kamakura's risk management products are currently used in 32 countries, including the United States, Canada, Germany, the Netherlands, France, Austria, Switzerland, the United Kingdom, Russia, the Ukraine, Eastern Europe, the Middle East, Africa, Australia, Japan, China, Korea and many other countries in Asia.

Kamakura has world-wide distribution alliances with Fiserv (, Unisys (, and Zylog Systems ( making Kamakura products available in almost every major city around the globe.

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