Analysis: US Treasury Yield Curve May Invert

Odaily reported that the spread between 10-year and 2-year US Treasury yields will narrow further in the coming months. Capital Economics stated that escalating tensions in the Strait of Hormuz could lead to a complete inversion of the yield curve. "One reason for this divergence is that short-term real rate expectations have risen more than long-term real rate expectations, likely in response to strong economic data." Capital Economics also expects the 2-year and 10-year Treasury yield curve to flatten further as investors price in expectations of additional rate hikes. "We forecast the Fed will raise interest rates by 75 basis points over the next year, compared to the 40 basis points currently reflected by the market," they stated. (Jin10)