Final answer:
The yield curve spread between 10-year T-bond and the federal funds rate is a leading indicator, which can predict future economic activity changes. A rise in supply in the financial market will typically lead to a decline in interest rates due to increased competition among lenders.
Step-by-step explanation:
The yield curve spread between 10-year Treasury bonds (T-bonds) and the federal funds rate is a type of economic indicator used to assess the state of the economy.
Leading indicators are those that predict future economic activity, coincident indicators describe current economic conditions, and lagging indicators provide information on economic performance that becomes apparent only after a trend or pattern has started. In the context of this question, the yield curve spread is generally considered to be a leading indicator because it can signal future economic activity changes, particularly in predicting recessions or expansions.
When it comes to financial markets and interest rates, a rise in supply can lead to a decline in interest rates. This happens because with more availability of funds, the price to borrow those funds, which is the interest rate, typically goes down due to increased competition among lenders.