10Y-2Y Yield Spread in 1998
10Y-2Y Yield Spread opened 1998 at 8 bps and closed at 11 bps, a +37.50% move for the year. The high of 60 bps was reached on October 13, and the low of -7 bps on June 25.
Monthly Breakdown
| Month | Open | Close | High | Low | Change |
|---|---|---|---|---|---|
| Jan | 8 bps | 21 bps | 28 bps | 5 bps | +162.50% |
| Feb | 21 bps | 7 bps | 26 bps | 7 bps | -66.67% |
| Mar | 12 bps | 7 bps | 16 bps | 5 bps | -41.67% |
| Apr | 7 bps | 9 bps | 11 bps | 4 bps | +28.57% |
| May | 8 bps | 3 bps | 13 bps | -2 bps | -62.50% |
| Jun | 1 bps | -5 bps | 3 bps | -7 bps | -600.00% |
| Jul | -2 bps | 1 bps | 5 bps | -4 bps | +150.00% |
| Aug | 0 bps | 14 bps | 16 bps | 0 bps | +0.00% |
| Sep | 19 bps | 14 bps | 21 bps | 6 bps | -26.32% |
| Oct | 16 bps | 52 bps | 60 bps | 12 bps | +225.00% |
| Nov | 51 bps | 20 bps | 53 bps | 16 bps | -60.78% |
| Dec | 23 bps | 11 bps | 23 bps | 5 bps | -52.17% |
Events During 1998
The Nikkei 225 peaked at 38,957 on December 29, 1989, then fell 82% over 13 years. Japan entered its "lost decades" of deflation, zero rates, and structural stagnation that still shapes global markets today.
Thailand's forced devaluation of the baht on July 2, 1997 triggered contagion across Southeast Asia. Indonesia, Korea, and Malaysia saw currency collapses, sovereign debt crises, and economic contractions of 10-15%.
Russia's default on August 17, 1998 blew up Long-Term Capital Management, which had $125 billion of assets on $4.7 billion of equity. The Fed orchestrated a private bailout to prevent systemic contagion.
Eleven European Union members locked exchange rates on January 1, 1999, creating the euro as a virtual currency. Physical notes and coins circulated from January 1, 2002. The euro became the largest monetary experiment since Bretton Woods.
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